Corporate Benefits Consulting Where Experience and Insurance Planning Services Independence Matter Retirement Plan Consulting Re-imagining Benefits Strategies in a Post-ACA World Brent A. Weegar, MBA May 4, 2016 Principal – Contact bweegar@ipsadvisors.com, Phone: 214-443-2429 www.ipsadvisors.com 10000 North Central Expressway, Suite 1100 • Dallas, Texas 75231-2313 • (214) 443-2400 Toll-Free: (800) 366-4779
Our Company – IPS Advisors � Established over 35 years ago, IPS Advisors is an independent fee based brokerage and consulting firm. Our governmental division services over 40 municipalities, counties and State agencies across Texas with their health and welfare benefits planning needs. � We provide specialized services through our core practice areas: � Corporate Benefits Consulting � Long Term Strategic Planning � Fully Insured and Self Insured Benefits Programs � Health Risk Management Programs � Compliance Assistance � Benefits Administration � Corporate Retirement Consulting � 457 Plans � Life Insurance Portfolio Management
Overview � Health Care Trends and Strategic Planning � Emerging Strategies and Best Practices � Pharmacy � Employer Funding � Health Care Delivery � Health Improvement � Engagement and Consumerism � ACA Trends and Updates � Public Exchanges Trends � Private Exchange Trends � Updates � Questions
Health Care Cost Trends: 2001 ‐ 2016 � Although health care trends have reduced to historically low levels they continue to outpace inflation. Plan design and contribution strategies have contributed significantly to the lower inflation rates. � There are signs pointing to future escalation ahead including expected double digit trend rates for pharmacy. Source: Willis Towers Watson / NBGH ‐ High Performance Insights
Health Care Cost Trends – Per Capita Costs � Total health care costs are expected to reach $12,041 per employee per year in 2015, up 4.1% from $11,567 from 2014. � Per Capita Health Care costs vary greatly by industry. Source: Willis Towers Watson / NBGH ‐ High Performance Insights
Strategy Recalibration � A widespread trend in healthcare strategy recalibration is underway across the country due to rising employer costs, economic factors and the Patient Protection and Affordable Care Act. Source: Towers Watson / NBGH ‐ The New Health Care Imperative Survey
Top 10 Strategic Focus Areas from Employers Source: Willis Towers Watson / NBGH ‐ High Performance Insights
Emerging Strategies and Best Practices � Multiple studies indicate that the emerging strategies and best practices in the following areas will drive strategic direction over the next three years. � Pharmacy � Employer Funding � Healthcare Delivery � Health Improvement � Engagement and Consumerism � Employers who have implemented the most best practices show a significant difference in per employee costs than those who have implemented the fewest. Both Mercer and Willis Towers Watson surveys have shown that cost varies from $700 to $2,000 per employee per year.
Pharmacy Benefit ‐ Trends � According to Segal, health insurance carriers are projecting an 11.5% increases to prescription drug trend for the 2016 plan year. This trend is largely attributable to the increased cost and use of specialty pharmacy. � Today 37.7% of drug spend is attributable to specialty medications and is expected to grow to 50% by 2018 (Express Scripts). � There are 7,000 potential drugs in development, most aimed at high use categories including Oncology, Neurologic Disorders and Infectious Diseases. Specialty Drug Trends Source: Express Scripts 2015 Drug Trend Report
Pharmacy ‐ Trends � Brand drugs increased on average 16.2% in 2015 while generics decreased ‐ 16.2%. � Except for a few outliers, payers remain confident that, on the whole, generic medications continue to deliver significant cost savings. Source: Express Scripts 2015 Drug Trend Report
Pharmacy Benefit Strategies � Specialty Drug Strategies � Cost sharing differentials � Mandatory specialty pharmacies � Step therapy � High Performance Formularies � Limited brand coverage � Compound Drugs � Pre ‐ certification � 60% expected to exclude by 2018 (Towers Watson) � Narrow Network � Exclusion of High Cost Pharmacies � Patient Adherence � Human Intervention � Cost Sharing � Technology Enabled Devices � Audits � Claims and Pricing Validation � On ‐ going Audits
Employer Funding Trends � Employers continue to shoulder the load, contributing on average 77.8% of total cost or $9,365 in 2015. This subsidy is expected to reduce 77.2% in 2016. � Employee costs are expected to rise 7.7% in 2016 compared to average salary increases of 3%. � Since 1999, employer share has risen 30% while the employee share has risen 27%. 2015 Total plan cost = $12,041 2016 Proj. Total plan cost = $12,643 $2,676 $2,882 $9,761 $9,365 Employer Employee Employer Employee Source: Willis Towers Watson / NBGH ‐ High Performance Insights Willis Towers Watson Financial Benchmark Survey
Employer Funding Strategies � Defined Contribution Approach � Flat dollar subsidy regardless of plan chosen 90% Implemented in 2015 81% Considering for 2018 80% � Spouse and Dependent Subsidy 70% � Decreasing Subsidies 61% 56% 56% 60% � Spousal Surcharge 46% 50% � 27% use Spousal Surcharges 40% � < 5% use Spousal Carve outs 27% 30% � Expansion of Optional Benefits 20% 13% � Dental 10% 3% � Vision 0% � Worksite Benefits Decreasing Decreasing Use of Eliminate All � New Market Entrants Subsidy to Subsidy to Spousal Spousal � Group Insurance Spouses Dependents Surcharges Subsidy � Guarantee Issue � Multiline Discounts Source: Willis Towers Watson / NBGH ‐ High Performance Insights � Funding Assigned to Participation � Annual Physical � Tobacco Use
Health Care Delivery Trends � Network and provider strategies have become a key focus areas due to ACA limitations on cost sharing and +85% of plan costs are directly attributable to claims / provider network. � Where highly discounted and broad PPO networks were once king for health care delivery, network strategy has shifted to focused health care delivery models where efficiency, quality and outcomes prevail. � Providers and Hospital systems are introducing new healthcare delivery models and are positioning both independently and in partnership with major health insurance carriers.
Health Care Delivery – Focus and Trends � High Performance Networks 88% � Narrow – Low Cost / High Quality Implemented in 2015 90% Considering for 2018 80% � Accountable Care Organizations 70% 62% � 60% Out of Network Coverage 46% � EPO Networks Emerging 50% � % of Medicare Reimbursement 37% 40% 25% � Telemedicine 30% 22% � 24/7 Access to Primary Care 20% 7% 5% 10% � Direct Contracting � Primary Care 0% � High Accountable Direct Telemedicine Musculoskeletal Performance Care Contracting � Lab and Imaging Networks Organizations � Reference Based Pricing Source: Willis Towers Watson / NBGH ‐ High Performance Insights � Imaging � In ‐ patient / Outpatient � Musculoskeletal / Cardiac / Bariatric
Engagement and Consumerism Trends � Employee engagement and consumerism is more important than ever as employers shift greater responsibility to members for health care purchasing and navigation of the health care continuum. � The adoption of Account Based Health plans reinforces the importance of engagement as employers approach near universal use. Source: Willis Towers Watson / NBGH ‐ High Performance Insights
Engagement and Consumerism Strategies � Account Based Health Plans � Continue to be a Core strategy � Gating strategies � Pricing and Quality Transparency � On ‐ line , Telephonic, and Mobile Access � Medical, Pharmacy, Dental, Vision Services � Employee Advocacy � Benefit Questions � Bill Audit and Negotiation � Pre ‐ Enrollment Support � Enhanced Care Coordination � Comprehensive Precertification � Decision Support � Continuous Data Mining � Health Coaching
Health Improvement Trends � Workplace wellness continues to be identified as top strategic area as 84% of employers plan to increase support of these programs. � Financial incentives tied to premium structures are improving participation rates in key health management programs. � Employers are slower to embrace outcomes based incentives as only 23% reported use in 2014 up from 6% in 2011 (Mercer).
Health Improvement Strategies � Incentives 80% � Combination of Rewards and Penalties % of Employer Offering 69% � Health, Well ‐ being and Engagement 70% � Refresh Annually 60% � Technology 50% � Wearable Devices 42% 39% � Apps – Web Based 40% � Group / Peer to Peer Challenges 30% 30% 24% � Tobacco Surcharges 20% � Over 40% of Employers use today � Average surcharge $600 Per Year 10% � Work/Life Balance 0% � "Wearables" Health Sleep disorder Stress Financial well ‐ Stress Management to track engagement programs management being � Financial Well ‐ Being physical mobile apps Programs programs � Sleep Disorders activity � Reporting Source: Willis Towers Watson / NBGH ‐ High Performance Insights � Prospective vs. Retrospective � Integration of other cost control efforts � Focus on outcomes
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