4 State of the Current Environment Premiums increased an average of 13.9% in 2003. Average coverage cost is now $9,068 family/$3,576 single. Plan sponsors continue to pay an average of 84% of premium for single and 73% for family coverage. Rx cost increases are driving employers and consumers toward generics. 58% of patients surveyed use the internet to become better educated about their treatment options and costs. A 4% pay increase is considered good in this economy is often negated by increasing health care costs. Rising costs squeeze budgets leaving less money for salaries and wages, especially among small employers. Data excerted from nationwide surveys conducted by the Kaiser Family Foundation, Fidelity Investment and Mercer Human Resource Consulting. Rather than cutting health benefits, employers are screaming for innovative coverage ideas.
5 Enter… Consumer Choice Health Care Holds Cost or Minimize Increases in 2004 Minimizes Premium Trend Going Forward – average 7% for CDHP rather than 15% PPO Continues to Provide Comprehensive, High Quality Medical Benefits Better Manages Utilization Supports Recruitment and Retention Goals Provides Incentives for Employees to Become Partners in Managing Health Care Costs
6 Employer Value Proposition Mitigates health care cost trend. Employs a new cost control strategy combining supply-side and demand-side management. Provides financial incentives to employees for wise health care purchasing. Motivates members to be healthy. Enables and supports employees to take control of their healthcare. Provides a safety umbrella in the event of multiple or catastrophic health events. Creates a partnership between Employer and Employee in managing health care quality and cost. Leverages the power of technology.
7 Current Adoption Rates When offered as an option: Up to 65% of participants enroll – appx. 20% is average 20% - 30% of new hires select Increasingly offered as full replacement More than 90% of employees re-enroll Employee surveys show high levels of satisfaction Employer and carrier analysis show positive financial results Employee and employer survey results from Towers Perrin, PriceWaterhouseCooper, Mercer Human Resources Consulting, Definity Health and Lumenos.
8 Abbott Labs Baylor Health Systems Budget Group Western Trailers Cardinal Health* Honeywell JB Hunt Novartis Pharmacia City of Provo US Postal Service Whole Foods Raytheon CVS Pharmacy Charter Communications Old World Industries Intel Medtronic Pitney Bowes Ridgeview Medical Center Trover Solutions Current Employers Offering CDHPs Large Group + Mid and Small Segments in All Industries * Current Bluegrass Family Health client.
9 Consumer Choice Best in Class Product Features Employer-sponsored, consumer-directed health care alternatives -- in its best form -- combine: 1. Preventive Care Coverage 2. HRA 3.Patient Responsibility 4.Traditional Coverage 5. Consumer Support – Web Tools Health & Medical Management Are fully Internet-enabled. Leverage and support consumer purchasing ability by providing access to tools. Focus on the consumer as the most powerful form of health care cost containment.
10 How Consumer Choice Products Work Example: Family Coverage Health Reimbursement Account $1,000 64% of participants roll over funds Average roll over amount of $342 Patient Responsibility $1,000 Traditional Coverage Employee is responsible for paying an out-of pocket amount. This is called the bridge or gap. Employee is responsible for paying an out-of pocket amount. This is called the bridge or gap. Annual employer pre-tax allocation to an employees HRA Employer provides coverage above the deductible Coverage takes effect when expenses exceed annual employer HRA allocation plus the Bridge. HRA used for qualified expenses; Unused amounts roll over year to year Deductible $2,000 Preventive Care 100% 1 st Dollar Coverage + Consumer Health & Medical Management + Web Enabled Tools FSA & Debit Card Features Optional
Institutional Trust Services Wells Fargo Health Benefit Services A Fast, Easy & Quality Solution!
12 Institutional Trust Premier Provider of Retirement, HRA, FSA and HSA Administrative Services Administering 120,000 HRA accounts; 95,000 FSA accounts. Total Trust Assets Under Administration:Over $500 Billion Total Trust Assets Under Management:Over $200 Billion Total Institutional Trust Staff:1,600+ Team Members Total Investment Professionals:200+ Team Members Total Wells Fargo Mutual Funds Assets:Over $72 Billion Total Retirement Plan Services Participants:Over 1 Million Institutional Trust Plans:Over 8,500
13 HRA Trends What we are seeing Both HRA & Flex use Benny TM Card for all of 213(d) Using data file to match card swipes to lessen audits letters. Most plans are NOT funded. Rx and Dental HRAs are new…we are introducing both for 2004 Flex first vs. second or mutually exclusive Vesting periods and retirement strategy including interest Offering HRA as option or full replacement
14 Employer Advantages of HRA vs HSA Potential HRA AdvantagesPotential HSA Disadvantages Cash flow advantageHRA $s are a promise to pay. Employer keeps control Employer may fund on pay-as-you-go basis but doesnt have real control. Employer has much more flexibility in designing plan High Deductible Health Plan (HDHP) more strict. Only $1K and 2K deductible or more will apply. Employer can decide to vest $ or not.HSAs are owned by EEs No trust required, company can set up VEBA. Most dont. Must set up trust No restriction on other plans ee may have.HSA participant cannot be covered by other plan with lower deductible. Maximum out-of-pocket not mandated, company has more freedom to design plan HSAs set limits on plans…$5k for single and $10k for family. Rx plans are problems EEs must use $ for qualified expensesEE can use $ for car payment and pay penalty Employer has more control of expense substantiation process Employer cannot restrict reimbursement or claims process
15 Card Features Works with Wells Fargo as the Intel Inside Interfaces with HRA and/or FSA; employees can still submit manual claims Used for allowable services wherever MasterCard is accepted Multi-Purse capabilities With web (wffbs.com) access to: – account transactions – account balances – account history
16 Rita Y. Woods Product Development Specialist Bluegrass Family Health
17 Bluegrass Consumer Choice Next Generation Alternative Employers Understand health care costs will continue to rise Most cannot continue to absorb the rising costs Employees Want more choice and control Underestimate the value of their health insurance benefits
18 Deductible Bluegrass Consumer Choice Five Major Components Web-enabled tools PPO Health Insurance Patient Responsibility Health Reimbursement Arrangement Preventive Care
19 Bluegrass Consumer Choice Plan Design – Phase I Co-insurance for all services except preventive care 90% / 10% in network 70% / 30% out of network 80% / 20% in network 60% / 40% out of network 70% / 30% in network 50% / 50% out of network Urgent care pays at in network rates CO-INSURANCE All services on a co-insurance basis -- No preset co-pay Utilizes current network
20 Bluegrass Consumer Choice Plan Design – Phase I
21 1234546789 00 123454678 900 Bluegrass Consumer Choice Web Support – MyBluegrassInfo.com
22 Bluegrass Consumer Choice Web Support – Wells Fargo Flex Benefits Services
23 Bluegrass Consumer Choice Plan Design – Phase I
24 Garry R. Ramsey Chief Marketing Officer Bluegrass Family Health
25 Bluegrass Consumer Choice Next Generation Alternative Brokers and Agents To review a sample Bluegrass Consumer Choice recommendation package, contact your Bluegrass Family Health Account Executive, or call 1-800-787-2680, ext. 4317. Employers For more information about Bluegrass Consumer Choice, please contact your Broker or Agent.
26 Nancy G. Atkins Director of Sales & Marketing Bluegrass Family Health
31 Quoting Process Phase 1 Step 1 -- You submit request to BFH Account Executive Step 2 -- BFH Account Executive submits request to Underwriting Step 3 -- BFH Underwriting calculates rates and returns to Account Executive Step 4 -- BFH Account Executive works with You to formulate recommendation Step 5 -- BFH Account Executive returns rates and recommendation to You
33 Garry R. Ramsey Chief Marketing Officer Bluegrass Family Health
34 HSA Integration – May 2004 Online Enrollment – July 2004 Enhanced Web Support Tools – 3 rd Qtr 2004 Automated Quoting Process – 3 rd Qtr 2004 Additional Rx Options – 4 th Qtr 2004 Carve in or out of medical HRA Stand-alone Rx-only HRA Bluegrass Consumer Choice Co-branded Benny Card – 4 th Qtr 2004 Bluegrass Consumer Choice Phase II
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