Employer Sponsored Health Benefits How we got here? Where do we go?

1. Employer Sponsored Health Benefits How we got here? Where do we go? Dane Spalt Manager of Large Group Sales

2. Healthcare Explodes over the next decade • Healthcare will “have the fastest employment growth and add the most jobs between 2014 and 2024,” says the U.S. Bureau of Labor Statistics (BLS). In fact, healthcare will become the largest employment sector of the U.S. economy, overtaking government and the business and professional service sectors. • Healthcare employment expected to grow 18% from 2016 to 2026 • Adding about 2.4 million new jobs, more than any other occupational group • In 2016 we hit $3.35 Trillion in total health care expenditures ($3,350.000.000.000) • That equates to $10,345 per every man, woman and child Bureau of Labor Statistics

3. Employer Sponsored Health Insurance • 89% of employees surveyed say their health benefits are as important to them as their salary. Mercer 2017 Employer survey • Contribution amounts • Employers contribute an average of 82% of the premium for single and 71% for family

4. Employer Sponsored Health Insurance Census Bureau Data 2016

5. Employers offering health insurance by size 1000+ - 99% 100-999 – 95% 25-99 – 73% 10-24 – 48% 1-10 – 22%

6. Dane’s Time Machine

7. 1942

9. Why Employers Began Sponsoring Healthcare Benefits • The Stabilization Act 1942 • Attempt to prevent inflation • Put a freeze on prices • Put a freeze on wages • Competition for workers • Employers began to offer health insurance and other benefits to attract and retain workers.

10. 1950

11. Employer Sponsored Healthcare Benefits in the 1950s • Organized Labor gained power • Negotiated better health benefits • Richer plans • Higher utilization • Increased prices

12. 1965

13. Medicare and Medicaid created in 1965 Helped retirees and low income people to afford health care. Patient – consumer Provider – seller of services Insurance – Payer Employer – buyer Insensitivity to costs

14. 1973

15. Emergence of Managed Care – The HMO Act • Health Maintenance Organization Assistance Act in 1973 • Encouraged growth of organized health care delivery systems • Provided funding to help start-ups • Established a process to become Federally Qualified • Required employers of 25 or more to offer an HMO option

16. Managing the Care • Many providers paid a flat amount per month to care for patients – capitation • Primary Care physicians are the gatekeeper to your health care • Defined network of providers • More focused on wellness and prevention • Utilization management techniques • Prior Authorizations • Case management • Disease management • Discharge Planning

17. Managed Care evolves • Preferred Provider Organizations (PPO) • In and out of network options • Patient self directs their care • Utilization management not as aggressive • Point of Service (POS) Plans • Combines HMO and PPO plan designs • Primary Care Physician coordinates care • In and out of network benefit options

18. 1996

19. Consumer Driven Health Plans – Health Savings Accounts • Medical Savings Accounts authorized as part of HIPAA – Clinton • In 2000 MSAs became Health Savings Accounts and were linked to specific qualifying high deductible plans – Bush • Employer and employee can contribute to the account – employee owns it • Contributions are tax free, deductions are tax free for qualified services

21. Health Plan types Source: Segal Consulting 2017

22. Enrollment by Plan Type 1988-2016

23. 2010

24. The Patient Protection and Affordable Care Act of 2010 PPACA ACA Obamacare

25. The Patient Protection and Affordable Care Act of 2010 • Primary focused on insurance changes • Standardized and pooled small group plans (no underwriting) • Eliminated pre-existing condition exclusions • Established individual mandate and employer mandate • Premium subsidies for low income, Medicaid expansion • Provided subsidies to insurers to help offset high costs • Government ceased paying subsidies in Sept 2017 • Estimated $12 billion owed to insurers nationwide

26. 2018

27. Affordable Care Act moving forward • Individual mandate repealed • Cadillac tax pushed back to 2022 • Health Insurance Tax reprieve for 2019 • Trump’s executive order • Expand Association Health Plans (AHPs) • Expand Short Term plans • Expand Health Reimbursement Arrangements

28. Trends and Strategies • Telemedicine • Concierge Medicine • Group Medicare • Self-funding • Level funded

29. Strategies and Trends continued • Association plans – loosening of regulations and rules • Network Strategies • High Performance or Narrow networks - emphasizing higher quality providers- saves money thru better outcomes. • Tiered Networks – emphasizes high quality tier 1, allows choice in tier 2, OON tier 3. • Specialty Drug Management • Harvoni – avg price for 4 week treatment $32,000 • Strategies- Spec Drug Mgt vendor, PA, ormularies, increasing copays • Referenced based pricing – Provider payment model gaining popularity

30. How Referenced Based Pricing Provider Payment Model Works Commercial fee schedule = 700% of Medicare Rates Insurance contract discount = 50% 350% of Medicare Rates Reference based price – “offer” 150% or 200% of Medicare Medicare Rates – baseline

31. 2028

32. Employer Sponsored Healthcare in 2028 • No more fee for service, providers are paid based on quality of care • More transparency; Easy access to quality and cost information for patients • Wearable devices enables providers to monitor patients 24/7 • Non-traditional mergers - CVS/Aetna • New players enter the healthcare/insurance space- Amazon, Berkshire Hathaway, JP Morgan • Smaller facilities rural areas– increase access and convenience

33. Single Payer System? • Should the Govt be responsible for ensuring healthcare coverage?? • Yes it is the Govt’s responsibility • No it is not the govt’s responsibility In a 2017 Pew Research Poll found - 60% say “yes” it is the Govt responsibility And 39% say “no” it is not the government's responsibility

34. Government responsibility for ensuring healthcare Pew Research Center

35. 2118

38. Thank you I hope you enjoyed the trip

39. References • https://www.shrm.org/resourcesandtools/hr-topics/benefits/pages/hsa-enrollment.aspx • https://www.ebri.org/pdf/briefspdf/EBRI_IB_433_CEHCS.25May17.pdf • https://www.kff.org/health-costs/report/2017-employer-health-benefits-survey/ • https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/nationalhealthexpenddata/nhe-fact-sheet.html • https://www.managedcaremag.com/archives/2015/8/capitation-once-and-future-king