The document discusses rising healthcare costs in the US and a new study projecting that healthcare spending will increase substantially over the next decade. It also summarizes strategies that large employers are implementing to better manage costs, such as health improvement programs, engagement of employees, accountability measures, and use of technology. Finally, it provides legislative updates on expanded preventive care coverage for women and subsidies available through the Affordable Care Act.

1. Good morning,
I finish writing this newsletter as the stock market continues to adjust to our country's debt
downgrade and the unrest in global markets. In that shadow, and still facing signs of recession, it
is difficult to talk of rising healthcare costs. That said......a new study published in the journal
Health Affairs, released from the CMS Office of the Actuary, projected that growth in health
care spending will average 5.8 percent per year over the next decade, which is 1.1 percent more
than our nation's annual projected economic growth (GDP). By 2020, health care spending will
represent almost 20 percent of all national spending, climbing almost 3 percentage points from
today.
This past year, health expenses increased 3.9 percent, a record low, which CMS attributes to the
recession. In 2014, national health spending is projected to grow 8.3 percent. This increase will
be driven primarily by the expansions of private health insurance and public health coverage
required by the Affordable Care Act (ACA). For more information on this study click here.
I hope you find this reading helpful in staying aware of legislative and market developments as
well as strategies that will enhance your organization's financial strength. Our mission is to offer
solutions that will control healthcare costs, increase the perceived value of your benefits and
improve the health and productivity of your employees.
With confidence,
Mike
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Market Trends, Surveys and Strategies
"The Road Ahead - Shaping Health Care Strategy in a Post - Reform
Environment"... Towers Watson and the National Group on Health teamed up again for their
16th annual employer survey conducted to identify purchasing value in healthcare. Facing the
many impacts of the Affordable Care Act, these employers sought bold actions they could
implement immediately to manage costs and mitigate risks. Their goals included rethinking their
benefit strategies to address not only cost, but the impact from this landmark legislation well
beyond the health benefits area, including reconsidering their commitment to retiree medical
sponsorship.
Immediate concerns they sought to address were: implementing best practices to avoid the
excise tax in 2018, (Cadillac tax); keeping abreast of evolving regulatory interpretation,
ph: (708) 845-3126 • mike.wojcik@thehortongroup.com

2. litigation and political changes; and taking advantage of account based health plans
(primarily HSAs) which they viewed as one of the best defenses in mitigating rising costs
to postpone the impact of the Cadillac tax.
Although this survey targeted employers with over 1,000 employees, many of their
strategies can be adopted by mid-sized groups with similar success. The study identifies
best practices and their outcomes which I liken to the sports analogy "doing the
fundamentals". In recalling my youth and reliving my children's sporting experiences, I
remember the best coaches preaching (screaming) "it's the fundamentals". In my business
career, my mentors echoed the same. I don't mean to oversimplify this exceptional study
but instead hope the market adopts their findings as the new "fundamentals" in controlling
healthcare costs while creating a healthier and more productive workforce.
These groups were able to deliver the following performance results in 2010: Healthcare costs per
employee per year: Consistent Performers at $9,016; High Performers at $9,302; Low Performers at
$11,047.
Their roadmap for success (my fundamentals) include:
- Health Improvement - focus to provide employees with the tools and resources they need
to lead healthy, productive lives.
- Engagement - use a multi-faceted approach. Most successful groups apply behavioral
economics to engage employees in wellness programs (cost differentials). They are
also twice as likely to use specific health-related standards for smoker status, weight
control and cholesterol levels than their peers.
- Accountability - Account Based Health Plans and harder lined positions. Higher
contributions based on employee compensation levels and spousal surcharges when other
coverage is available.
- Linking Provider Strategies - Use high performance networks, target contracting with
providers that emphasize best outcomes (soon this will include Accountable Care
Organizations (ACOs) and medical home models).
- Technology - provide employees with personal health records and an employer sponsored website to
promote year-round education on important health topics and other information. In addition, social
media options are being explored for credible and trusted sites.
- Healthy Environment - Embrace a culture of health by creating a work environment that
encourages healthier lifestyles. They brand their wellness program in all communications
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3. and align health and safety initiatives.
- Measurement and improvement - The most successful use data metrics to evaluate programs and
target areas for improvement and investment.
To view the full survey click here.
Legislative Updates and Impacts
The Affordable Care Act (ACA) Expands Preventive Coverage.... The Department
of Health and Human Services recently commissioned the Institute of Medicine (IOM), an
independent federal advisory body to conduct a study and review what preventive services were
missing from today's healthcare coverage and necessary for women's health and well
being. Based on this recommendation, non-grandfathered health insurance plans will include
expanded preventive coverage for women starting with new and renewal plan dates of August 1,
2012. By definition of the new law, these services will not be subject to co-pays, deductibles or
co-insurance and covered at 100%. For a full listing of services, click here.
I agree with these additions and feel many should have been included in plans long ago,
however, how they were added does raise alarm. It's a pretty good example of how
legislation will control non-grandfathered plans in the future. And due to the near
impossible guidelines to remain grandfathered it appears most plans renewed in non-
grandfathered status. Those still remaining will eventually move to non-grandfathered
status once the pricing, benefit pressures or compliance becomes too great.
It will take a delicate balance of legislation controlling the insurance market to expand access to
coverage and providers while keeping it all affordable. I hope they do not lose sight of the original goal.
"Pay or Play" Health Subsidy Guidelines for 2014 under the Affordable Care
Act (ACA)... When the Affordable Care Act engages most of its 2014 requirements employers
with more than 50 employees will have the option of paying a penalty and not offering health
coverage to their members. But the answer to the pay or play question will not be as easy as just
paying a $2,000 penalty per employee per year. Subsidies will play a major role in affording
coverage to millions. Employees will either be subsidized by their employers at an affordable co-
share level as outlined by ACA, or if those levels are not met, individuals can go to the state
insurance exchange and potentially receive a subsidy based on their reported earnings. ACA will
expand the Medicaid level to include individuals at 133% of the Federal Poverty Level (FPL) and
subsidize those between 133% and 400% through the state insurance exchange. In Illinois the
lowest and highest levels equal $14,484 to $43,560 for singles and $29,726 to $89,400 for a
ph: (708) 845-3126 • mike.wojcik@thehortongroup.com

4. family of four click here for the chart.
Employer plans will be assessed a $3,000 per employee per year penalty for anyone leaving their plan to
get a subsidized exchange program. This could sound attractive relative to the cost of the group plan,
however it could impact a good risk pool and jeopardize participation requirements of the insurance
carrier; in addition, the premiums the individual pays will be made with post-tax dollars.. Please see the
Kaiser Family Foundation subsidy calculator in the following attachment.
Pre-existing Condition Insurance Plan available in Illinois.... For many years
Illinois had its own state plan for individuals and families that were denied health coverage by
insurance carriers called the CHIP plan (Comprehensive Health Insurance Plan). Little known, a
second program, subsidized by the federal government is also available as a result of the ACA
law. "The Pre-existing Condition Insurance Plan" appears to be more affordable but carries
higher deductibles and out of pocket costs. This plan is meant to be a transitional plan until the
Insurance Exchanges open in 2014 and the law then eliminates pre-existing conditions and
health underwriting.
Qualifications include: you must be uninsured for at least six months, must be a citizen or
national of the United States or residing in the U.S. legally, and you have a pre-existing
condition or have been denied coverage because of your health condition. Please refer to
this site for more information...
Insurance Carriers and Healthcare Providers In The News
This NEW section of the newsletter will feature some of the notable activities of insurance
carriers and providers throughout the country that are having documented success with
implementing some of the non-traditional components of the Affordable Care Act.
Blue Shield (of California) ACO reduced costs, lowered readmission by 15
percent... In an interview by Kaiser Health News, Blue Shield of California CEO Bruce Bodaken
discussed the benefits of an ACO Partnership between Blue Shield, Catholic Healthcare West and
Hill Physicians. In a program with the state's public employee health program, CalPERS, the ACO
collaboration demonstrated a 15 percent reduction in hospital readmissions, as well as regular
admissions. CalPERS received a zero premium increase for 41,500 members in the ACO. "We did
it by becoming more efficient, so it's not a function of losing money", Bodaken said. To read the
full interview click here.
You may recall Blue Shield of California made news in early June when they announced
they would cap their profits at 2 percent and refund anything above that to their clients.
ph: (708) 845-3126 • mike.wojcik@thehortongroup.com

5. What is an Accountable Care Organization (ACO)? An ACO is a healthcare delivery
model developed under the Affordable Care Act, initially for Medicare with intentions to
expand into commercial markets. The concept requires a new approach to care delivery
and management, including coordination of care between primary care physicians,
specialists, hospitals and long term care facilities. Payment reforms reward providers who
achieve quality and cost targets. ACOs are not HMOs with a new name, but some of the
steps sound familiar. The Congressional Budget Office estimates that ACOs could save
$1.2 billion in annual Medicare costs by 2019 with more saving to come. The model will
be interesting to follow.
Human Resource Center
Employers Mandating Healthy Employees?.... What do companies or organizations
like Macy's, PepsiCo, Union Pacific, Scotts Miracle-Gro, Humana, Cleveland Clinic and Central
Texas Medical Center all have in common? They have either adopted a no-smoke policy, charge
health plan members a surcharge for tobacco use, or flat out refuse to hire smokers (depending
on state laws).
Making news the past few weeks, these employers came out with strong statements taking an active role
in their employee's health hoping it will affect their bottom line. Hospital Groups are going as far as not
hiring and also requiring flu shots and vaccinations for communicable diseases...click here.
The US Centers for Disease Control and Prevention cites medical spending and
productivity losses for smokers at $193 billion a year. All the commentaries center on the
health cost savings, we should not lose site of the $97 billion that came from lost
productivity. Both categories are critical to succeed in this competitive global
economy. Read the fact sheet.
Reminder - Annual Enrollment period has changed.... Beginning in 2011, the annual
enrollment period for Medicare Part D and Medicare Advantage plans has been changed to
October 15 through December 7. As a result, Notices of Creditable and Non-Creditable Coverage
relating to employee benefit plans' prescription drug coverage for Medicare eligible participants
must now be distributed to participants by October 15. Previously, these notices were required
to be sent by November 15. As a reminder, the notices must also be provided under the
following circumstances: (1) when a Medicare eligible individual joins the plan: (2) prior to when
an individual becomes eligible for Medicare: (3) prior to a change in the prescription drug
coverage which causes it to change from being creditable to non-creditable: and (4) upon
request from the beneficiary.
ph: (708) 845-3126 • mike.wojcik@thehortongroup.com

6. Horton Webinars & Seminars (Reminders)
Upcoming Horton Events.... Read More
ph: (708) 845-3126 • mike.wojcik@thehortongroup.com