1. Increasing Health Care Costs
and Your Employee Health Plan
Presented by: Alford, Staples, Lapeyre, & Robichaux

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 consumer-driven health plans
•Promoting employee health and wellness
•Increased employee cost-sharing
•Auditing and increasing cost-sharing for dependents
•Strategic vendor management
•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 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

12. 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

13. 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

14. 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

15. 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

16. 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

17. 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?

18. The Impact of 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

19. The Impact of 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

20. The Impact of 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

21. QUESTIONS?
THANKS FOR YOUR TIME!
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