Health care costs have been increasing at an alarming rate for over a decade. Average health care costs increased 7.5 percent in 2010 (up from 6.9 percent the year before). Following years of growth, the rate of increase is projected to slow for 2012, to 7 percent. Using health care data to make strategic decisions A top employer strategy for reducing costs, according to a Hewitt Associates study Using measurable data and analytics to drive health benefits strategy Important to go beyond accessing the data, and understand how to apply it to making health plan decisions and implementing changes Matthew Byrne has made a career helping people find affordable health insurance in Ohio. He is the founder of MyHealthQuoter.com, a Dublin-based brokerage providing Ohio health insurance quotes and services for individuals, families and corporations. Mr. Byrne is a subject matter expert speaking frequently about Health Care Reform, Defined Contribution Programs, COBRA, and Medicare. He can be reached at (614) 336-3636, and online at www.MyHealthQuoter.com.

1. Managing Increasing Health Care Costs
and Your Employer Sponsored Health Plan
Presented by: Matthew Byrne

2. Health Care Costs Continue Climbing
• Health care costs have been increasing at an
alarming rate for over a decade.
• Average health care costs increased 7.5
percent in 2010 (up from 6.9 percent the
year before).
• Following years of growth, the rate of
increase is projected to slow for 2012, to 7
percent.

3. National Trends
Annual Health Care Cost Increases, National Averages 2004-2012
Source: Hewitt Health Value Initiative™, 2011

4. National Trends
Annual Health Care Costs Per Employee, National Averages 2005-2012
Source: Hewitt Health Value Initiative™, 2011

5. Contributors to Rising Costs
Several factors have led to the climbing health care costs
over the past decade, including:
• Demographics
• Expansion of health care providers
• Consolidation of managed care companies
• Political environment/government regulation
• Increased utilization and consumer demand
• New medical technology
• Weakening of managed care system
• Health care spending and medical cost inflation
• Increased prescription drug costs

6. Contributors to Rising Costs
Contributors to the current projected spike in
health care costs:
•An aging population and workforce
•Poor general health among employees

7. Contributors to Rising Costs
• Aging workforce
o Population is aging
o Slower hiring levels have lead to older
workforces
o Older workers are more prone to severe and
costly health conditions
o Employers have seen a rise in the frequency and
cost of catastrophic claims, presumably due to
the aging workforce

8. Contributors to Rising Costs
• Poor general health
o Employees have become more and more
unhealthy, which has also contributed to health
care cost increases
o Preventable risk factors such as obesity and
high blood pressure had led to increases in
chronic, costly medical conditions such as
diabetes and heart disease

9. What Employers Can Do
Employers are becoming more proactive in instituting
strategies and programs to reduce overall health care
costs, including:
•Using health care data to drive health care strategy
•Greater emphasis on plan design management, employee cost sharing,
consumer-driven health plans and employee education
•Investigate funding alternative and reinsurance options
•Promoting employee health and wellness and disease management
programs
•Auditing and increasing cost-sharing for dependents
•Strategic vendor management and benefit administrative technologies
•Looking at long-term solutions and plans, rather than short-term fixes

10. What Employers Can Do
• Using health care data to make strategic
decisions
o A top employer strategy for reducing costs,
according to a Hewitt Associates study
o Using measurable data and analytics to drive health
benefits strategy
o Important to go beyond accessing the data, and
understand how to apply it to making health plan
decisions and implementing changes

11. What Employers Can Do
• Greater emphasis on plan design management
o Use benchmarking to assure that the benefits you offer
are competitive in the marketplace
o Analyze deductibles, copays, Rx plans
o Incentivize dual or triple option plan designs to
encourage change in utilization
o Consider association plans for discounts
o Consider implementing Employee Insurance
Committees to encourage peer education opportunities

12. What Employers Can Do
• Increased employee cost-sharing
o Companies will continue to shoulder the burden, but
are passing off more costs to employees:
- Moving from fixed dollar copayments to coinsurance
- Increasing deductibles and out-of-pocket maximums
- Increasing cost-sharing for non-network providers
- Offering consumer-driven plans
- Increasing cost of brand name drugs to incentivize
generic use
- Wrap your program in inexpensive discount program

13. What Employers Can Do
• Greater emphasis on consumer-driven plans
o Consumer-driven health care has become increasingly
popular
o Balances cost-savings for the employer, with employee
empowerment to make own health care decisions
o If paired with proper education,
employees will become smarter
health care consumers - which
will save both the company and
employees money

14. What Employers Can Do
• Investigate funding alternatives and
reinsurance options
o Fully Insured
• Standard
• Refund Eligible
• HRA / Fully Insured Gap Programs
o Partially Self Funded
o Self Funded

15. What Employers Can Do
• Promoting employee health and wellness
o A common initiative, aimed at increasing employee health and
effectively lowering health care costs
o Many employers targeting specific diseases and creating more
comprehensive programs
o Incentives for participation, particularly for actions that promote
actual behavior change (such as participating in a certain
program, rather than just taking a health risk assessment)
o Penalties for nonparticipation, especially in the form of higher
premiums or other employee cost-shifting
o Wellness and disease management programs are highly
dependent on quality employee education and communication
tactics

16. What Employers Can Do
• Dependent management strategies
o Conducting dependent eligibility audits can save
companies huge amounts of money
- Studies show that an average of 3 to 12 percent
of dependents are not actually eligible
o Many companies shifting to a per-member premium
fee, rather than just “individual” and “family”
o Emerging trend is requiring spouses to pay more in
premium or assessing a surcharge, to encourage
spouses to enroll in their own employer’s plan

17. What Employers Can Do
• Strategic vendor management
o Another recent trend is companies evaluating their
vendor relationships more aggressively
o Vendors not producing measurable results are being
replaced or eliminated
o Looking for opportunities to consolidate vendor
relationships to get the most for their money

18. What Employers Can Do
• Benefits Administrative Technologies
o Single-source vendor to handle many HR concerns
• Eligibility
• Billing
• COBRA / State Continuation
• Payroll Services

19. What Employers Can Do
• Long-term strategies vs. short-term fixes
o Short-term tactics, such as employee cost-shifting,
are still prevalent
o Many employers are also looking more closely at
multi-year plans and longer-term initiatives to
improve overall employee health and strategically
manage costs in the future
o Especially in the wake of health care reform, many
employers are worried about developing strategies
that have sustainability in keeping costs down

20. Cost Impact: Prescription Drugs
• Prescription drugs are an important part of
health benefits and make a big impact on cost
• Prescription drug spending has been one of the
fastest growing components in health care over
the past several years
o This growth has slowed lately, partially due to
increased availability of generics and
decreased medication adherence by patients

21. Strategy: Prescription Drugs
Prescription drug cost-cutting strategies:
•Instituting or rearranging your drug tier structure, to
incentive use of generics and increase cost for specialty
drugs
•Joining purchasing pools or drug discount programs
•Promoting the use of mail-order prescriptions

22. Strategy: Prescription Drugs
Prescription drug cost-cutting strategies:
•Promoting employee consumerism when buying
prescriptions
•Encouraging medication adherence
o Lack of adherence can cause costly medical
complications and exacerbate chronic
conditions
o An employee education and communication
initiative is needed for this to be effective

23. Managing Increasing Health Care Costs
and Your Employer Sponsored Health Plan
Presented by: Matthew Byrne
MyHealthQuoter.com

24. Cost Impact: New Technology
Dazzling new technology-- MRI, computer-controlled
insulin pumps, and more
In 2006, diagnostic imaging costs
approximately $100 billion nationally--an
increase from $75 billion in 2000
American devotion to the newest, most
expensive technology is a driving force
behind growth in U.S. health care spending-
-much more than other industrialized
nations – without providing better care
Estimates of medical technology
contribution to health care spending growth
range from 38%- 65% Newhouse, JP “Medical Care Costs” &
The Robert Wood Johnson foundation

25. Cost Impact: Variation in Medical Treatment
A RAND Corporation study, says up to 1/3 of
health spending is attributed to
unnecessary hospitalizations, redundant
tests, unproven treatments, and excessive
end of life care
The RAND Corporation estimates 1/3 of care
in the U.S. could be of little value meaning,
hundreds of billions of dollars each year are
wasted on superfluous treatments
Adoption of evidence-based practices
lacking as documented by a 2003 RAND
Corporation study showing only 55%
receive recommended care

26. Cost Impact: Physician Payment System
 Physicians paid piecemeal--for each test or
procedure they perform, rather than a flat
salary
 Physicians have financial incentives to perform
procedures that drive up health care spending
 Doctors paid little for routine exams &
“cognitive services” --researching treatment
options, advice without treatment
 Doctors paid whether procedures go well or
badly & whether they are crucial or not
 May perform a test costing $4,000 to make
$800 when a cheaper test might work as well

27. Cost Impact: Hospital Mergers & Construction
 Previously unaffiliated hospitals are being
acquired by companies that manage entire
hospital systems
 These companies limit the ability to negotiate
lower reimbursement rates
 Hospital construction spending has increased
substantially, up more than 75% since 2002
 MedPAC advised Congress that hospital
construction for 2006-2007 was up 20%
 Other providers such as testing labs and
medical suppliers have seen consolidations, as
well BlueCross Blue Shield Association
“Hospital Construction Spending”
2008 Medical Cost Reference Guide:
Facts &Trends Driving Healthcare Costs

28. Case Study - Serigraph
• Self insured with 1200 lives
• High deductibles of $750, $1,000 and $1,500
• Coinsurance of 30 in network
• Premiums have increase just 3 times in seven years, each by a
very small amount.
• Health Reimbursement Account ranging from $468 to $3120.
• Flexible Spending Accounts available.
• Max out of pocket: $3250-$6,000 per person in network
• Stop loss at $200K
• Free preventive
• Requires annual mini-physicals
• Up to 2 healthy days off for healthy lifestyles
• Rebates coworkers $250 to $2000 for selecting, “Center of
Value” providers.
• Transparent price and quality rankings n intranet site.
• Free on-site clinic
• Free Primary care thru retained doctor
• Proactive disease management
• Onsite fitness center

29. Case Study - Serigraph
• In 2003, Kaiser Family Foundation estimated
the average medical costs at $9,068 per
family.
– In 2003, Serigraph costs were $8,302 per
family, 8.5% below the national average.
• In 2009, Kaiser Family Foundation estimated
the average medical costs at $13,591 per
family.
– In 2009, Serigraph costs were $8,631 per
family, 36% below the national average.
• The Serigraph gap continues to widen.
So, how did they do it?

30. Strategy: Cost of Care
Initiatives
– Health improvement & preventive care
programs
– Cost-effectiveness treatment
comparisons
– Disease Management programs
Pipeline Initiatives
– Contracting strategies
– Innovative reimbursement methods
Watch list Initiatives
– New technology effectiveness and cost
– Innovative treatments cost-effectiveness

31. Strategy: Utilization
• Utilization drops sharply with adoption of an
employee-empowered plan.
• Cost shifting is NOT the objective of a well
designed consumer driven plan.
• Savings flow to workers in multiple ways.
• Individual responsibility has to be built into any
plan to attain cost control
• Personal health accounts are popular with
employees, giving the power to make decisions.
• Actuaries factor behavior change into lower
renewal increases.
• The higher the level of engagement, the better
the plan works in reducing costs.
The Company that Solved HealthCare, John Torinus

32. Strategy: Cost Containment
• Give employees the right incentives to
change their behaviors.
• Trust and encourage employees to get their
heads in the game of controlling costs.
• Go to a consumer driven, high deductible
plan, offset by personal health accounts
(HRA, HSA).
• Chasing discounts is a failed strategy.
• Get co-workers to understand that they and
the company need to work together.
• Show how savings flow to the employees.
The Company that Solved HealthCare, John Torinus

33. Strategy: Making the Marketplace
• Move your health care to providers with the
best value.
• Take advantages of price variations across
systems and within systems.
• Create a marketplace where none now exists.
• Pay incentives to employees to get them to
select the best medical deals.
• Cut deals for bundled prices.
• Remember, high price does not equal high
quality.
• Go abroad or out of your immediate market
for elective surgery is you want real deals.
The Company that Solved HealthCare, John Torinus

34. Strategy: Primary Care
• Free or low priced clinics can markedly improve
delivery
• Primary care must be restored as the foremost
provider in any system
• Primary care that is owned by payers provide
great efficiency helping reduce automatic
steerage to high priced specialists and hospitals.
• Care in on-site clinics can be far more intimate
and organized than a big hospital system.
• New competitors allow payers to contract on a
flexible basis for any primary care needed by their
employees.
The Company that Solved HealthCare, John Torinus

35. Strategy: Communication
• Health improvement and cost containment
won’t happen without education and good
information.
• Don’t just communication, hyper
communicate on health matters.
• Transparency on costs and quality is
imperative.
• New web based tools offering medical
information helps immensely. Educate your
people on how to use them
• Urge employees to share decision making
with their doctor.
The Company that Solved HealthCare, John Torinus

36. Determining the Right Strategy for Your
Company
• Is our program structure, plan design and pricing
appropriate?
• Do we have all the right vendors, services, contracting and
funding in place?
• Are our employee communication efforts appropriate and
effective – especially in regards to employee health and
wellness and consumerism?
• Do we have effective disease management and wellness
programs for our employees?
• Do our pricing and plan design features encourage cost-conscious
behavior on the part of our employees?
• Are we thinking about long-term solutions rather than simply
quick fixes for this year?

37. Matthew S Byrne (614) 336-3636
QUESTIONS?
THANKS FOR YOUR TIME!