1. Health Risk Management

2. Today’s Presentation Define Health Risk Management (HRM) Our vision The bottom line impact of poor Health Risk Management The scope of a proactive HRM study Elements Program Partnerships Long term study strategy Our enrollment progress to date

3. Health Risk Management A worksite-based proactive approach to helping identify and reduce specific health risk factors through healthier lifestyle choices. Assessment Coaching and education Specific interventions Reporting

4. Our Vision To reduce workers’ compensation costs and provide measurable benefits to policyholders by improving employee health and productivity. Core areas of opportunity –Workers’ compensation cost and trend improvements –Increased productivity for employers –Improved health and wellness status of employees –Be a leader in the application of health risk management in workers’ compensation

5. Why Health Risk Management Now? Workplace Safety Medical Management Organizational Culture/Structure Health Risk Management 1970s1980s1990s2010 Employer BehaviorEmployee BehaviorOperational Behavior

6. The Bottom Line Impact of Poor Health Risk Management Workers’ Compensation Costs Productivity Health Insurance Claims

7. Medical 22% Disability 4% Productivity Loss 74% DIRECT OTHER COSTS Health Care Costs Medical Care Hospitalization Pharmacy Diagnostic Testing Behavior Health Physical Therapy Workers’ Compensation Lost Productivity Absenteeism Employee & Customer Dissatisfaction Turnover Replacement Training Missed Deadlines Overtime Pay Sub Par Quality Temporary Staffing Presenteeism Adverse Bottom Line Impact Total Cost of Poor Employee Health Sick Leave Other Wage Replacement Indemnity Costs Medical Costs

8. Workers’ Compensation: Direct Cost A greater than 8-fold difference in w.c. costs between recommended weight and obese workers. Duke University A 7-fold difference in w.c. costs between high and low risk workers. University of Michigan A 23% decline over 2 years in w.c. claims costs and 18% decline in w.c. claims volume among companies engaging in HRM. Wellsource Health Solutions Health risks have a compounding impact on w.c. costs Obese claims are 2.8 times more expensive than non-obese claims at the 12-month maturity. The cost difference climbs to a factor of 4.5 at the three year maturity and to 5.3 at the five year maturity. National Council on Compensation Insurance (NCCI), 2009

9. Duke Study 200 180 160 140 120 100 80 60 40 20 0 14 12 10 8 6 4 2 0 BMI<18.5 (Underweight) 18.5 – 24.9 (Healthy Weight) 25 – 29.9 (Overweight) 30 - 34.9 (Obese Class I) 35 – 39.9 (Obese Class II) 40+ (Obese Class III) 40.97 14.19 60.17 75.21 117.61 183.63 Claims per 100 FTEs 5.53 5.80 7.05 8.81 10.80 11.65 The most obese have 13 times more lost workdays than healthy weight workers Lost WorkdaysClaims Lost Workdays per 100 FTEs Source: Ostbye, T., et al, “Obesity and Workers Compensation,” Archives of Internal Medicine, April 23, 2007.

10. Duke Study $10,000 $0 BMI<18.5 (Underweight) 18.5 – 24.9 (Healthy Weight) 25 – 29.9 (Overweight) 30 - 34.9 (Obese Class I) 35 – 39.9 (Obese Class II) 40+ (Obese Class III) $7,109 Indemnity costs are 11 times higher for the most obese workers than for healthy weight workers. Medical Claims CostsIndemnity Claims Costs $70,000 $60,000 $50,000 $40,000 $30,000 $20,000 $3,924 $7,503 $5,396 $13,338$13,569 $19,661 $23,633$23,373 $34,293 $51,091 $59,178 Source: Ostbye, T., et al, “Obesity and Workers Compensation, ” Archives of Internal Medicine, April 23, 2007.

11. Productivity Employers, on average, have $3 of health-related productivity costs for every $1 of medical or pharmacy claims costs. (Journal of Occupational & Environmental Medicine July 2007) Lost productivity represents 7.9% of total corporate earnings and 5.3% of human capital costs. (Health and Human Capital Foundation) The most costly conditions related to productivity are often not the same as the most costly conditions related to medical treatment costs. Taking an integrated approach to health and productivity results in more cost-effective interventions. (Journal of Occupational & Environmental Medicine July 2007)

12. Look Beyond Health Insurance Costs Anxiety $0 MedicalPresenteeism Other Sleeping Problem High Cholesterol Arthritis Hypertension Obesity DrugAbsenteeism Fatigue Depression Back/Neck Pain $100,000$200,000$300,000$400,000$500,000$600,000 JOEM July 2007 Chronic Pain

13. Impact of Health Insurance The vast majority of Pinnacol policyholders have fewer than 25 employees We assume the rate of uninsured status, from a health care perspective, mirrors the state as a whole Approximately 50% of our participants are likely to have no health insurance Placing HRM in a worksite environment rather than a health insurance environment is a key differentiator

14. We Believe In the future, Health Risk Management will be as fundamental to managing risk as safety is now.

15. Pinnacol HRM Components 3-5 year timeframe Partnering with key agencies Free HRM services to policyholders 3,000 participating policyholders representative of Colorado’s workforce (Small and medium sizes of employers are a critical component) 30,000 enrolled members

16. Pinnacol’s HRM Program Health Risk Assessment for employees Health education and coaching Specific interventions and programs Reporting on participation and outcomes Policyholders Agents Pinnacol Colorado/national

17. Pinnacol’s HRM Partnerships Service Delivery - Interventions Wellsource Health Solutions (WHS) Reporting WHS: Health risk profile Integrated Benefits Institute: HPQ-Select Productivity Survey (Harvard-WHO tool) Data/Evaluation IBI, Thomson Reuters/Emory University/local universities

18. HRM Study Strategy Use outside independent evaluators to conduct a peer review quality assessment of the long term impact of HRM on: Health risk profile of our policyholders and their employees (based on trended HRA results) Monetized changes in productivity (based on trended results of HPQ-Select) Changes in Workers’ Compensation (based on participant pool versus Pinnacol control group) Changes measured over 3 – 5 years Work with local universities and researchers to identify other relevant issues and make data available for non-Pinnacol initiatives

19. Progress Toward our Study Goals Data as of 8/27/2010 Enrolled Policyholders 105 of 3,000 9,148 of 30,000 Enrolled Employees