This document discusses healthcare costs, healthcare reform, and family wellness. It explores these topics in the context of consumer driven health plans (CDHPs) and their role in addressing rising healthcare costs, ongoing healthcare reform efforts, and promoting family wellness. The document provides examples of how CDHPs with health savings accounts (HSAs) or health reimbursement arrangements (HRAs) have helped lower costs for employers like Arizona Central Credit Union while still providing quality coverage options for employees.

1. Healthcare Costs, HealthCare Reform and Family Wellness
0

2. SHRM 2012 Trend Book – Top three Benefit Concerns:
Health care costs
Health care reform
Family health
1

3. SHRM 2012 Trend Book – Top three Benefit Concerns:
Health care costs
Health care reform
Family health
Hypothesis: Consumer Driven Health plans play an
active role and have a track record of success in
strategies that address all three concerns
So let’s explore our topic in the context of Yesterday,
Today and Tomorrow……….
2

4. Yesterday
The Social Transformation of American Medicine:
The rise of a sovereign profession and the making of a vast
industry
Paul Starr
Winner of 1984 Pulitzer Prize for General Non Fiction
3

5. Today
The Peculiar American Struggle over Health Care Reform
Paul Starr
Winner of the 2011 American Publishers Awards and Scholarly Excellence
(PROSE) in the Government and Politics category, as given by the Association of
American Publishers
4

6. Woodrow Wilson – 28th President of the United States (1913 – 1921)
5

7. Health Care Reform first begins in 1917
Between 1910 and 1913 Workers
Compensation laws passed requiring
compulsory insurance against industrial
accidents
Political reformers thought Americans could
be persuaded to adopt compulsory insurance
against sickness which caused poverty and
distress among many more families
National debate on health insurance begins
on the eve the U.S. enters WWI
6

8. In Favor of Health Reform and Compulsory Health Insurance
Believed workers would benefit
from compulsory health insurance
as a means of income protection
Believed enhanced quality of life
and that employers would realize
handsome returns from a healthier
more productive workforce
As an additional cost containment
feature, reformers strongly believed
that doctors should be paid on a
capitated basis instead of fee for
service…
7

9. Opposed to Health Reform - Business, Unions, Insurance
Industry and the Medical Profession
Opposition for these groups had
more to do with issues of control and
power rather than the argument that
strong and healthy citizens lead to a
strong and healthy country
Neither employers nor unions were
interested in a social welfare program
that would increase workers’ loyalty to
either of them
Opposition from insurance industry
was due to the initial proposed health
insurance package that included a
funeral benefit. Prudential had 38% of
the market and Met 34% of the
industrial life insurance market
8

10. Opposed to Health Reform - Business, Unions, Insurance
Industry and the Medical Profession
The medical profession and the
AMA believed the patient physician
relationship was sacred. Doctors
charged what their patients could
afford to pay and would do anything in
their collective power to defeat a
system that introduced intermediation
into their compensation
9

11. What happened instead of national health insurance?
1920s and 1930s
Health care costs began to hit the middle class both with increased physicians
fees and hospital costs
1929 Health care costs estimated at 4% of national income or $3.66 billion.
Social Security and The New Deal offered an expansionary vision: increased
access to medical care by augmenting nation’s medical resources and reducing
financial barriers to their use – yet no threat to physicians’ income.
1940s and 1950s
Kaiser, Kaiser Permanente evolved from industrial health care programs for
construction, shipyard, and steel mill workers for the Kaiser
industrial companies during the late 1930s and 1940s. It was opened to public
enrollment in October 1945.
1960s
 Academic medicine flourished and hospital growth mushroomed
10

12. Kaiser’s Legacy
Former Broncos owner Kaiser, approved trade for Elway, dies
CBSSports.com wire reports
Jan. 14, 2012 5:42 PM ET
DENVER -- Former Denver Broncos owner Edgar F. Kaiser Jr., who
oversaw the trade that brought Hall of Fame quarterback John Elway
to Denver, has died, according to a charitable foundation Kaiser
established.
Cheryl Smith, PHR, Safety and Benefits Specialist Desert Del Oro
Foods – Northwest Arizona Human Resource Association
(NWAHRA) – June 2012
11

13. Richard Nixon – 37th President of the United States (1969 – 1974)
12

14. Discovery of a Crisis - Runaway costs and Barriers to
access
From 1960 – 1975 the share of health care expenditures paid by third parties
increased from 45 to 67 percent (The Blues, private plans, Medicaid, Medicare)
The $10.8 billion government had spent in 1965 became $27.8 billion by 1970
Health expenditures had risen from 4.4% of the federal budget in 1965 to
11.3% of the budget in 1973
13

15. Discovery of a Crisis - Runaway costs and barriers to
access
Specialization flourished and general
practitioners grew scarce
Lack of facilities and providers in rural
areas
Emphasis on inpatient care over
ambulatory and preventive health services
14

16. Discovery of a Crisis - Runaway costs and barriers to
access
Favorable HMO legislation passed during this era
1979 7.9 million people were enrolled in HMOs
HMOs costs were significantly lower mainly because of reduced hospitalization
For every 1,000 people, Kaiser plan subscribers had only 349 days of
hospitalization compared to a national average of 1,149
However Nixon’s political dream of national health insurance disappeared in the
scandal that ended his presidency
15

17. Bill Clinton – 42nd President of the United States (1993– 2001)
16

18. Clinton Health Care Plan of 1993
Provided universal health care coverage for all Americans
Employer mandate to offer coverage to all employees through HMOs
Hillary Clinton was drafted by the Clinton Administration to head a new Task
Force and sell the plan to the American people, a plan which ultimately backfired
amid the barrage of fire from the pharmaceutical and health insurance industries
and considerably diminished her own popularity
By September 1994, the final compromise Democratic bill was declared dead
17

19. What did happen during Bill Clinton’s first term?
The Family and Medical Leave Act of 1993 (FMLA) is a United States
federal law requiring covered employers to provide employees job-
protected and unpaid leave for qualified medical and family reasons
The bill was a major part of President Bill Clinton's agenda in his first term.
President Clinton signed the bill into law on February 5, 1993
18

20. Barack Obama – 47th President of the United States (2009 – current)
19

21. Today
According to Kaiser Family
Foundation, the United States
spends more per capita on health
care than any other country
Spending as a percentage of the
gross domestic product has risen
from 9 percent in 1980 to 16
percent in 2008; and may top the
20 percent mark in a few years
20

22. Unsustainable Health Care Cost Increases Are a Universal
Concern
Since 2006 Today 2012
Employer 40% increase $8,000 average spent per employee
Employee 82% increase of out-of-pocket $5,000 average spent per year
and payroll contributions
Total Cost 52% increase Nearly $13,000 per employee annually
With employee pay typically rising at 3%
per year, compare a 19% pay increase
to an 82% health care cost increase
over the past 5 years.
Experts estimate that health care costs will
Source: Aon Hewitt HHVI Database
continue to rise at 8-9% per year
21

23. Worsening Health Risk – A National Problem
It starts with Obesity: know the NUMBERS
of Americans will be overweight or obese by 2030
86% based on current trends. Today 33% of adults are
overweight and 34% are obese. Childhood weight is also
an issue with 32% of US children currently overweight or obese
deaths per year may be attributable to obesity
300,000
increase in the risk of coronary heart disease mortality for each 2.2
1%–1.5%
pound increase in body weight
of all medical 2.3% increase in claims cost for each unit
increase of BMI
spending
10% is accounted for
by obesity,
compared to
the new onset of diabetes for a
Double weight gain of 11–18 pounds over
6.5% in 1998
10 years
Sources: various academic and governmental publications
22

24. Health Care Reform 2010 Addressed Access to Coverage
BUT…did not address cost or population health
23

25. Consumer Driven Health Plans To The Rescue?
24

26. What Is a Consumer Driver Health Plan (CDHP)?
A High Deductible Health Plan (HDHP)
A Tax Favored Account
HRA or HSA
Integrated with Health
Management/Wellness Framework
Consumer Tools & Resources
25

27. A ‘Qualified’ High Deductible Health Plan (HDHP)
Minimum Deductible:
2012 $1,200 Single / 2,400 Family
2013 $1,250 Single / 2,500 Family
Maximum Out of Pocket
2012 $6,050 Single / $12,100 Family
2013 $6,250 Single / $12,500 Family
Maximum HSA Contributions
2012 $3,100 Single / $6,250 Family
2013 $3,250 Single / $6,450 Family
Catch up contributions allowed for those over 55
•All expenses apply to deductible with the exception of preventive care
•Preventive care can include physician services, lab/xray and some medications
26

28. ‘Qualified’ HDHP & Health Savings Account (HSA)
Health Plan (Qualified HDHP)
$2,000/year Deductible
Preventive Care 100%
Health Plan Pays After Deductible
Gap $2,000
Employee Responsibility
Limited purpose FSA
(vision, dental, expenses HSA
after deductible) (Employer or Employee Funded)
Assumes single, in-network coverage
27

29. Health Reimbursement Arrangement (HRA)
Health Plan (PPO, HMO, HDHP)
$2,000/year Deductible
Preventive Care 100%
Health Plan Pays After Deductible
HRA - $1,000
Employer Provided Coverage
GAP - $1,000
FSA
(If elected) Employee Responsibility
Assumes single, in-network coverage
28

30. HRA/FSA/HSA—Features

31. Strategy and HDHP/CDHP Plan Designs
What type of high-deductible, consumer-driven health plan(s) does your
organization offer or plan to offer?
High-deductible health plan
with employer-seeded Health 31% 7% 43% 19%
Savings Account (HSA)
HSA-eligible, high-deductible
health plan with no employer 13% 2% 32% 52%
account funding
High-deductible health plan
with Health Reimbursement 21% 2% 35% 42%
Arrangement (HRA)
High-deductible health plan
9% 1% 21% 69%
without an attached account
50% 50%
Other
Currently Offer Will Offer in 2012 May Offer in 3–5 Years Not Interested
Source: Aon Hewitt 2012 Health Care Survey
30

32. Greater CDHP Acceptance—HRA or HSA Option
HRA Prevalence
2011 – 41%
2012 – 38%
HRA Prevalence
HSA Prevalence
2011 – 59% Consumer
2012 – 62% Choice
¹ Source: Aon Hewitt 2012 CDHP Survey Results
31 31

33. HSAs Gaining Popularity
Nationwide 11.4 million people were enrolled in HSAs January 2011, up by 1.4
million from a year earlier according to America’s Health Insurance Plans Center
for Policy and Research.
In Arizona, 174,720 employees have HSAs – about 5% of the state’s private
health insurance enrollees.
Phoenix Business Journal, May 4, 2012
32

34. THE TOP 5 – Employer Objectives for offering CDHP
1. Promote Self-Service Environment and Accountability (Consumerism)
2. Contain Rising Health Care Costs
3. Provide a Low-Cost Plan Without Increasing Employee Contributions
4. Offer ‘Cutting Edge’ Benefits
5. Expand Choice of Offerings
*Aon Hewitt 2012 CDHP Survey – Middle Market
33

35. Case Study: Arizona Central Credit Union
Why Did Arizona Central Credit Union Chose a CDHP?
Rising costs of employee benefit costs
Culture shift away from mindset that benefits are free
The need to offer an affordable premium option for employees with dependents
Ability to save using a Health Savings Account (HSA)

36. Case Study: Arizona Central Credit Union
Transition Process
Transitioned from offering traditional PPO and HMO plans to HDHP with HSA
and a Choice Plan (EPO)
Started charging premiums for the EPO and offered deductible subsidy for the
HDHP
Honesty and Transparency Were Key!
 Started from the Top with Visible Senior Leadership Support
Educated and Trained our Employees

37. Case Study: Arizona Central Credit Union
Transition Process
 Selected HSA Funding Strategy
 Years1 and 2 - Subsidized In-Network Deductible at 50%
 Contributed - $750 individual
 Contributed - $1500 Family
 Years 3 and 4 - Discontinued HSA subsidy and started charging premiums for
HDHP plan

38. Case Study: Arizona Central Credit Union
HDHP with HSA Enrollment Results
Year % of Enrollment in HDHP with HSA
2009--Year 1 39%
2010--Year 2 41%
2011--Year 3 40%
2012--Year 4 33%

39. Case Study: Arizona Central Credit Union
Experience
Plan Years
15
11.9
10
9.6 8.1
8.9
5
Plan Results
4.6 ACCU Initial Renewal
ACCU Final Renewal
0
PPO Trend
-2
CDHP Trend
-5
-9.1 -9.1
-10
2009 2010 2011 2012
-15
38

40. Case Study: Arizona Central Credit Union
Wellness Initiatives
Biggest Loser Competition
Partnered with Local Gym
Took Advantage of all the FREE resources

41. Case Study: Arizona Central Credit Union
Impact of Health Care Reform on Benefit Plan Strategy
90%

42. Report From the Field – What Do the Carrier’s Say?
“Over five years, cumulative cost savings are sustainable and can grow to $9700
per employee enrolled in a CDHP compared to employees who remained in a
traditional plan.”
 Higher levels of care - preventive care, such as annual office visits and mammograms,
more frequent
 More savvy consumers of health care – choose generic medications and had 14% lower
pharmacy costs by comparison
Source: Cigna Sixth Annual Choice Fund Experience Study released March 2012
“CDH Plans Offer Material Savings “
 Savings can result from better decision making
 HSA plans are associated with higher savings than HRA plans
 A well designed plan includes a ‘preventive’ drug list
Source: UnitedHealthcare Consumer-Driven Health Plan Performance Report 2011
41

43. Report From the Field – What Do the Carrier’s Say?
“HRA/HSA members spend 7% less on overall health care costs”
 More frequent use of routine, preventive and chronic care
 Higher usage of online tools
 Plan sponsors impact engagement by thoughtful execution of strategy
Source: 8th Annual Aetna Health Fund Sturdy released 2012
42

44. Lessons Learned
Communication is Key!
 Early and Often
 Multimedia Approach
HR & other Senior Leaders Must ‘Walk the Talk’
Focus on the Most Confusing/Impactful Topics
 How do the accounts work?
 Changes to prescription drug benefit (copay vs deductible)
Help Me Understand
 How do I decide what is best for me?
What Do I Need to Do? How Does This Work? Tell Me One More Time!
43

45. Tomorrow
44

46. Potential Areas of Health Care Reform impact on CDH plans
Medical Loss Ratio (MLR) - Fully insured plans
 MLR calculation does not include funds contributed to HSAs
Value of employer sponsored health coverage
 W-2 forms issued in early 2013
 HSA, FSA, HRA, and stand alone vision and dental plans excluded
Minimum Essential Benefits
 Expected costs for benefits must have actuarial value of 60%
 Currently under consideration: only a portion of employer’s contribution to HSA or
HRA will be included in actuarial valuation
Stephen Miller, CEBS, 3/21/12 online editor/manager SHRM
45

47. Potential Areas of Health Care Reform impact on CDH plans
Cadillac Tax - 2018
 40% tax calculated based on amount in excess of threshold – aggregated employer
sponsored benefits including value of health insurance premiums; vision, dental and
other supplemental insurance premiums; including the employer’s contributions to
HSAs, HRAs and FSAs
Affordability
 Employee contribution for single coverage cannot exceed 9.5% of family income –
unknown if employers’ contributions to HSA or HRA can be included in calculation for
affordability
Exchanges
 CDH plans will be available in Vermont exchange
 Other states unknown
Stephen Miller, CEBS, 3/21/12 online editor/manager SHRM
46

48. Join us for an
update
Questions?
karen.alter@aon.com
mary.harwood@azcentralcu.org
janet.vreeland@aon.com
Thank you!
47