This document discusses strategies for improving healthcare management and reducing costs for employers. It notes that healthcare costs have been rising significantly faster than wages and inflation. Obesity is a major driver of higher costs. The current healthcare system rewards volume over outcomes and lacks prevention incentives. Employers are increasingly burdened by indirect costs like lost productivity from illness. The document advocates evaluating total costs, including indirect costs. It suggests changing plan designs to incentivize health and value over volume. Brokers' commissions could be reduced if employers took a more active role in managing benefits. A thorough audit and strategy tailored to an organization's workforce is recommended. Ongoing communication with employees is also key to success.

1. How to improve your bottom line
through better healthcare
management
Emery Benefit Solutions, LLC
Susan A. Emery, President/Owner

2. Why are we you here?

3. Cumulative Increases in Health Insurance Premiums, Workers’
Contributions to Premiums, Inflation, and Workers’ Earnings,
1999-2011
Source: Kaiser/HRET Survey of Employer-Sponsored
Health Benefits, 1999-2011. Bureau of Labor
Statistics, Consumer Price Index, U.S. City Average
of Annual Inflation (April to April), 1999-2011;
Bureau of Labor Statistics, Seasonally Adjusted Data
from the Current Employment Statistics Survey,
1999-2011 (April to April).

4. Average Annual Premiums for Single and
Family Coverage, 1999-2011
* Estimate is statistically different from estimate for the previous year shown (p<.05).
Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 1999-2011.

5. We are getting sicker!
• Obesity may be more expensive than
smoking when it comes to health costs.
• Researchers from the Mayo Clinic found that
people who are obese have an extra $1,850 in
health costs, on average, a year compared with
normal weight people.
• People who smoke, on the other hand, have
$1,275 extra, on average, in health costs per year.
• And for people who are morbidly obese, the costs
are even higher, up to $5,500 a year.

6. Some of the causes of high costs
Stressful Worksites and Unhealthy Products
Toxic Payment System that Pays for:
• Volume rather than outcomes
• Individual units of care rather than episodes
of illness
• Acute care not prevention
• Medical errors and “do overs”
• With no performance based payment
Consumer Entitlement Mentality:
• That insulates individuals from cost sensitivity because of
3rd party payment

7. Why do or should you care?
• Recently, a Gallup poll showed that
overweight and obese workers cost $153
billion each year to businesses because of lost
productivity.
• Altogether, they miss an extra 450 million days
of work each year, compared with people who
are not obese or overweight.

8. Cost of Retention
How Much is it Costing You?
Several well-regarded studies have recently line cost. The top line cost? If the
comp estimated the cost of losing an employee:
• SHRM, the Society for Human Resource Management, estimated that it
costs $3,500.00 to replace one $8.00 per hour employee when all costs
— recruiting, interviewing, hiring, training, reduced productivity, et cetera,
were considered. SHRM’s estimate was the lowest of 17 nationally
respected companies who calculate this cost! (some as high as $25k)
• Other sources provide these estimates: It costs you 30-50% of the annual
salary of entry-level employees, 150% of middle level employees, and up
to 400% for specialized, high level employees!

9. The GAME

10. THE GAME BASICS
• THE PLAYERS:
– Insurance Companies,
– Employers,
– Insurance agents/consultants,
– Employees/Individuals
• THE GAME:
– Who can get the most money or lowest premium
WITHOUT revealing their hand
– Though we all KNOW small groups really have no options
• WINNERS and LOSERS
– Who usually is the loser?
– Are there ever any winners?

11. MORE GAME BASICS
• See our agent once a year at renewal
• They “SHOP” our insurance to find a better DEAL
• We get a really cool spreadsheet
• Usually lucky to keep increase at a single digit
with some cuts in benefits and employee
contribution increases.
• Rest of the year: Our agent is available to us
when we call.. Or one of his/her staff members

12. “Learn the rules well, so you can break them
properly.”
(Dalai Lama)

13. EVEN THE SCORE
WHAT YOU NEED TO KNOW….

14. Insurance vs. Benefits
• Insurance was designed to protect individuals and
families from catastrophic illness so they will not
become bankrupt
• Employers started to offer to their employees as part
of compensation packages (with the thought they have
healthier employees – showing up for work)
• Insurance companies begin to add more “protection”
into the policies – making insurance more
“comprehensive”

15. Insurance vs. Benefits
• Health care cost continue to rise:
– IDEA: Get people healthy so less catastrophic claims–
Add doctor office copays and preventive paid at 100%
– Insurance is still paying for this???? =
• Actuary’s Nightmare!
– Everyone can use preventive (so you are paying for all
whether they use it or not)
• Example: What if car insurance paid your oil
changes and tune ups? What would happen to
your premiums?

16. Insurance vs. Benefits
• Offering to pay for people to be healthy is a
benefit not and insurance expense.
–People should pay to take care of
themselves
• So the Difference SHOULD also be in the
funding (how we pay for it)

17. Funding Benefits & Insurance
• Fully insure Catastrophic Risk
• Fully insure, self fund Benefits
– HRA, HSA
– “GAP” plans
– Other limited benefit plans
• Plan design and the DETAILS ARE CRUCIAL!!!!
• Not only is it important to COMMUNICATE to
employees but HOW is even more!

18. Why even offer Insurance or Benefits?
• Moral obligation to employees
• Believe employees ARE the business: success
of the business is directly connected
• Attract & retain employee – the BEST
employees
• Mere cost of doing business – have to offer it

19. What else do you need to know?
Direct Costs
vs.
Indirect Costs

20. Direct Costs
• Insurance Premiums
(Health, Life Disability,
workers comp)
• Health and DI Claims
• Administrative costs
– Internal & external
• Broker Commissions
– Do you know what this is
and what you are getting
for it?

21. Direct Cost
What makes up an Insurance Premium
• Administrative costs
• Broker Commissions
• Claims
– Lots of Influence – if understand human behavior
and have access to claims
OR
• Community Rating (less control)
– Underwriting:
• Health,
• Census (age, status ),
• Industry,
• Company size

22. Indirect Cost
• Turnover
• Poor work performance
– Absenteeism,
presenteeism, disability
– Affect both direct and
indirect costs
• Lack of qualified
candidates
• Competition

23. Small and Mid-sized Employers -
Constraints and Advantages
Constraints
• Limited HR resources
• Small risk pool
• Fully insured
• Broker dependency
• Single plan option
(not really)
Advantages
• No corporate
bureaucracy
• Leadership
engagement
• Worksite culture
• Benefit Advocate

24. "The significant problems we face cannot be
solved at the same level of thinking we were
at when we created them"
(Albert Einstein)

25. Change the Rules
• Claims or Health Status
– You can INFLUENCE behavior to affect insurance,
retention and productivity costs
– Encourage health through employee education and
other health programs
– Integrate with other employee programs, such as safety,
workers comp/disability
– Design a value based plan – find carriers that support
your goals
– Use every part of the money you spend to benefit you
and your company

26. Plan Design Approaches1
Financial Design Value-Based Design
Conserve resources through decreased
utilization
Focus on long-term outcome of improved
functional health
Efficient management of each line item Total cost picture to include indirect costs
Cost sharing based on acquisition cost of
service or product
Subsidize effective services through
lowered out-of-pocket exposure
Decrease or eliminate subsidy for
ineffective services
Plan design applies to all members
Vary financial subsidy based on individual
needs
1. Mahoney J. Value-based designs. Presented to the Health Care Service Corporation; May 2009; Richardson, TX.
18

28. Change the Rules
• Broker Commissions
– ARE YOU GETTING YOUR
MONEY’S WORTH?
– You agent is paid by the
insurance carrier. Between 5-
15% of the premiums you
pay.
– There is no performance
evaluation by the insurance
company.
– EXAMPLE: 25 Employee
Company – Agent makes on
average $20,000 per year
that’s $1,666 per month.

29. Now what?
• C-Suite/Leadership Recruitment
• Complete Audit & Diagnostics: 20-25 Point thorough review of current plan,
enrollment and claims (if available), profile workforce population health and total
cost burden
• Health and Productivity Strategy Development: targeted to employer’s
workforce characteristics
• Review of history : What was tried, Did it work or not, Why
• Value Based Health Plan Selection: Search for innovation (e.g. embedding
consumer incentives in plan design, high performance provider networks, health
risk assessments)
• Results: MEASURE – REVIEW – MEASURE – REVIEW - IMPROVE

30. Conclusion
• The renewal is not the time to solve cost issues
• Know what is happening long before receive renewal
• Have a plan!
• Find partner that works with and for you and is
compensated in such a way.
– Percentage of savings
– Monthly outlined services
– 3-5 year cost reduction strategy
• NO MATTER WHAT, COMMUNICATION with your employees
is imperative
• More importantly is the HOW: CLEAR, CONSISTANT,
CONTINUAL communication… otherwise, none of this
matters…