L. L. Andreatta & Associates Livio L. Andreatta, President Advanced Chartered Benefit Consultant State Public Relations Officer & National Public Affairs Officer for the National Association of Alternative Benefits Consultants (NAABC) Special Consultant: Corporate Benefit Consultants Certified Senior Advisor (CSA) Financial Consultant Over 35 years experience in Group and Individual insurance and corporate benefit plans. Member: Chicago Southland Chamber of Commerce

Of those covered by group health plans, 50% will spend less that $1,000 per year on their health care. 25% of those will spend NOTHING at all! 8% of those covered spend 70% of all the dollars spent on health care. Employees pay for only about 20% of their health care expenses. BASIC FACTS

20-30% of your premium is cost shifting and goes to cover Medicare and Medicaid due to inadequate government reimbursement. Another 5-7% of premium cost shifting goes to cover the care of the uninsured at hospital emergency rooms. HIDDEN TAXES

CONSUMER EDUCATION In a recent study... 50% of respondents were uncertain how much they paid for their monthly health insurance premium. 55% were uncertain about their annual deductibles. 77% reported that they were less than sure of what the terminology used in their health insurance policy actually means. 80% do not know what PPO stands for.

Consumer Driven Health Plans Individual & Group

Can we keep funding Health Care the way we are doing it now? Six straight years of double-digit increases, with more projected. Vision is seeing the future now and acting upon it.

How do you slow down utilization without rationing health care?

INSURANCE COMPANIES: EMPLOYER EDUCATION: AGENCY/AGENT:

KEY ELEMENT: CDHPS have to have $$ controlled by the employee with incentives/rewards to use these dollars more effectively. NO GIMMICKS!!!!! KEY ELEMENT: CDHPS have to have $$ controlled by the employee with incentives/rewards to use these dollars more effectively. NO GIMMICKS!!!!! High deductible plans center piece. High deductible plans center piece. The human nature factor. The human nature factor.

1. The insurance company keeps the premium savings with the promise that they will reduce future renewal increases. 2. The premium savings are primarily directed to the employee and are put into a claims account they own and control. (HSAs) 3. The premium savings are primarily directed to the employer and are put into an account the employer owns, but that the employee controls and has incentive to use more wisely. (HRAs)

True HSA PlanTraditional Pre-paid Plan Variation 2Variation 3 Insurance Company Co-Insurance Deductible Co-pays Deductible Insurance Company Deductible Insurance Company Deductible Co- paysRx Rx % Rx Co-pays Office Co-pays

American Community HSA PlanTraditional Pre-paid Plan Variation 2Variation 3 Insurance Company Co-Insurance Deductible Co-pays Deductible Insurance Company Deductible Insurance Company Deductible Rx Co-pays Rx % Rx Co-pays Office Co-pays $500 Preventive Care

American Community Common Family Plan Traditional Pre-paid Plan Insurance Company Co-Insurance Deductible Co- pays Deductible Insurance Company Single $2,700 Rx Co-pays Office Co-pays Insurance Company Family $5,450 Deductible Insurance Company Single $2,700 Insurance Company Family $5,450 Deductible American Community Embedded Family Plan $2, %

KEY INTERNAL COST CONTROL FACTORS Discretionary medical costs vs. societal changes and attitudes.

Whereas once health care and health insurance were understood as activities related to acute injuries and illnesses, they have expanded to include preventive and mental health services, long-term care, complementary medicine, and the ability Whereas once health care and health insurance were understood as activities related to acute injuries and illnesses, they have expanded to include preventive and mental health services, long-term care, complementary medicine, and the ability to maintain psychological, social, spiritual, and sexual performance far into the golden years. James C. Robinson, PhD

Entitlement Factor in America Corporations are Bottomless Pits Corporations are Bottomless Pits Unrestrained Desires Unrestrained Desires Want-it-All Attitudes Want-it-All Attitudes

Consumers are not paying the bills No Skin in the Game!!! No Skin in the Game!!!

What it Really Costs!!!!! Average Doctors Office Visit (w/tests) $250 Average Doctors Office Visit (w/tests) $250 Average Co-Pay $10-30 Average Co-Pay $10-30

Phase Industry is Now In Bringing consumers into the game Bringing consumers into the game as educated and informed purchasers… as educated and informed purchasers…

Key To This Transition EDUCATION !!!!!! EDUCATION !!!!!!

As consumers, the idea of people learning how to save their own money is powerful

KEY INTERNAL COST CONTROL FACTORS Discretionary medical costs vs. societal changes and attitudes. Discretionary medical costs vs. societal changes and attitudes. Reigning in Rx cost explosion. Reigning in Rx cost explosion.

REIGNING IN Rx COSTS Rx costs have increased from 5% of total claims in 1990 to over 18%. Rx costs have increased from 5% of total claims in 1990 to over 18%. More money is spent on advertising Rxs than on research & development. More money is spent on advertising Rxs than on research & development. Market forces and education have to be brought into this Rx equation. Market forces and education have to be brought into this Rx equation.

Can your company continue to take these projected increases without changing your strategy?

Address Cost The Employers Options The Employers Options Drop Coverage Drop Coverage Absorb the costs themselves Absorb the costs themselves Pass premium costs on to their employees Pass premium costs on to their employees Reduce benefits Reduce benefits or Try a bold new approach that gives Try a bold new approach that gives employers more control over cost employers more control over cost while giving more choice to employees while giving more choice to employees

SOLUTION: GETTING BACK TO RISKED BASED INSURANCE

Milliman & Robertson, Inc.

THREE LITMUS TESTS FOR CDHPs How does your plan design treat employees with catastrophic or chronic conditions? How does your plan design treat employees with catastrophic or chronic conditions?

THREE LITMUS TESTS FOR CDHPs How does your plan design treat employees with catastrophic or chronic conditions? How does your plan design treat employees with catastrophic or chronic conditions? How does it treat the 55+% of employees who spend less than $1,000 per year? How does it treat the 55+% of employees who spend less than $1,000 per year?

THREE LITMUS TESTS FOR CDHPs How does your plan design treat employees with catastrophic or chronic conditions? How does your plan design treat employees with catastrophic or chronic conditions? How does it treat the 55+% of employees who spend less than $1,000 per year? How does it treat the 55+% of employees who spend less than $1,000 per year? How does it curb the abuser/user? How does it curb the abuser/user?

HOW IT WORKS:

100% PREMIUM $ Use 60% of premium to pay for Catastrophic Insurance 90% Rx, treatments, surgery Hospital, doctor, lab tests $250 deductible Rx $10/$20/$35 co-pay ER $75 co-pay Office Visit $20 co-pay 100% Rx, treatments, surgery Hospital, doctor, lab tests NO CO-PAYS $2,000/$2,250/$2,500 Deductible Fund actual claims under deductible Rx, treatments, surgery Hospital, doctor, lab tests HRA REDUCED PREMIUMHRA BENEFIT DESIGN $5 MILLION How does the HRA concept work? 10% $1,000 Out-of-pocket PPO PREMIUMPPO BENEFIT DESIGN $5 MILLION Owners choice when used REDUCEDBY40%REDUCEDBY40% Unused premiums are retained in your checking account $___________ Out-of-pocket

Most Expensive of Health Care Designs are called Prepaid Medical Plans 1. Deductible 2. Office Co-Pays 3. Co-Insurance 4. RX Cards 5. Typical Out of Pocket

100% PREMIUM $ Surgery Hospitalization Office co-pays ER co-pays Treatments X-rays Lab Tests Specialists Rx co-pays Large Claims Small Claims Use 60% of premium $ to pay for Catastrophic Insurance 90% Rx, treatments, surgery Hospital, doctor, lab tests 10% out-of-pocket $250 deductible Rx $10/$30/$50 co-pay ER $75 co-pay Office Visit $20 co-pay 100% Rx, treatments, surgery Hospital, doctor, lab tests NO CO-PAYS $2500/$5,000 Deductible Fund actual claims under deductible Rx, treatments, surgery hospital, doctor, lab tests etc. HRA Reduced PremiumHRA How does the HRA concept work? Pre-Paid PPO PremiumPPO Benefit Design REDUCEDBY40%REDUCEDBY40% Unused premiums are retained in your checking account Owners choice when used Why do we have health insurance? Most people cant afford to write a check for $50,000 - $100,000 - $1,000,000 Those covered never see the actual cost of their health care Most dont care... as long as theyre covered Facts You only pay for what you use Remaining unused HRA funds at the end of each year roll over and are retained in your checking account. INSURED NEVER SEES THE ACTUAL COSTS OF TREATMENTS, OFFICE VISITS, AND PRESCRIPTION DRUGS

Employer Can Decide Design. Pay same Claims, BUT in a Different Manner 1.Premium Savings 2.Tax Savings 3.Key Point – Claims Paid when used. BOTTOM LINE… ON AVERAGE, COMPANY WILL SAVE BETWEEN $1,000 TO $3,000 PER PERSON PER YEAR.

CURRENT STARMARK PLAN $1,500 Deductible 90/10% Co-Insurance X 2 90% Co-Insurance Individual OOP$2,000 Family OOP$4,000 Rx Card $10/$25/$40/30% $20 OV MEDICAL RATES PER MONTH 13 Employee Only$ Employee/Spouse$ 1 Employee/Child$ Family$ Total Premium$6, Savings with HRA Plan 44% No Employer Deposit to HRA Account Maximum OOP Exposure w/deductible Individual $3,500 + Co-pays Family $7,000 + Co-pays TOTAL COST OF HRA Monthly Premium $3, HRA Contributions $3, HRA Administration $ Total Cost $7, AMERICAN COMMUNITY HRA Deductible $2,700 Single $5,450 Family 100% Co-insurance 100% Co-Insurance Individual OOP$ 2,700 Family OOP $ 5,450 Rx Discount Card MEDICAL RATES PER MONTH 13 Employee Only$ Employee/Spouse$ 1 Employee/Child$ Family$ Total Premium$ 3, Monthly Premium Savings$ 2, Annual Premium Savings$34, Employer Deposits to HRA Employee$ 1, Family$ 3, Maximum OOP Exposure Individual$ Family$1, TOTAL SAVINGS OF HRA Guaranteed Monthly Savings($ ) Guaranteed Annual Savings($6,869.96) Expected Annual Savings$13,045.04

G & G MFG Renewal CarrierAC Previous$141.25$353.14$277.19$ AC Renewal$151.14$377.86$302.28$ Aetna$240.00$457.00$404.00$ Blue Cross$296.14$666.32$666.32$ Humana Declined to quote – rates not competitive PhysiciansCare$215.17$418.19$379.32$ Starmark$174.31$401.49$343.76$ Unicare$170.91$396.60$396.60$ With your Starmark traditional plan, you would have spent $ on premiums for 2008 With your Starmark traditional plan, you would have spent $ on premiums for 2008 With your American Community HRA, you have spent $44, on premiums for 2008 With your American Community HRA, you have spent $44, on premiums for 2008 You have saved $34, on premium over the past 12 months You have saved $34, on premium over the past 12 months Your employees utilized 13,000 in HRA reimbursements through your renewal date. Your employees utilized 13,000 in HRA reimbursements through your renewal date. That means you have kept over $21,000 in your checking account during your first year of your HRA That means you have kept over $21,000 in your checking account during your first year of your HRA Your 7% renewal increase amounts to $3, With your Starmark plan, this 7% increase would have amounted to $5, Your 7% renewal increase amounts to $3, With your Starmark plan, this 7% increase would have amounted to $5, Your Starmark renewal premium would have been $ Your Starmark renewal premium would have been $ Your American Community HRA plan renewal is $47, Your American Community HRA plan renewal is $47, Thats an additional savings of $3, Thats an additional savings of $3, This brings your actual total annual savings for your first year to over $24, This brings your actual total annual savings for your first year to over $24,679.00

SOME FUTURE ISSUES Cost Shifting by the Government!!! Cost Shifting by the Government!!! Reducing Rx Costs. Reducing Rx Costs. Tort Reform. Tort Reform. Flexibility on State Mandates. Flexibility on State Mandates.

How Do You Start This Educational Process Contact Livio Andreatta, ACBC, CSA L. L. Andreatta & Associates Illinois Office: (708) Michigan Office (269) Cell: (708)