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Introducing a health care strategy for exasperated employers of all sizes

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Why do employers need a strategy when it comes to their health care benefits?

• Health care costs continue to escalate.

• Health care costs continue to escalate.

• Health care costs continue to escalate.

In 2005, health insurance is expected to cost at least 10 percent more - marking five years of double-digit increases. A diminishing number of small businesses can offer health coverage to employees, according to studies by the Henry J. Kaiser Family Foundation. The group found that 63 percent of small businesses offered health insurance this year, down from 68 percent in 2001.”

Health Care Squeeze, Washington Post, Nov. 1, 2004

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Why do employers need a strategy when it comes to their health care benefits?

• Most employers can do a much better job of getting the ultimate consumers of health care … their employees … better engaged in in the process.

– Some employers have been too slow in asking their employees to pay a fair share of the cost.

– Some employers have been, in effect, over-insuring.

– Some employers have not helped their employees to take more control of, and improve, their health.

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In implementing a strategy, what should an employer look for in a health plan?

• A vast portfolio of products from which to choose, and the willingness to offer multiple products to groups 10+.

• The ability to integrate a well-managed Personal Health Account option, as part of total offering.

• A health plan that helps empower members to become engaged consumers of health care.

• A health plan that has built a reputation for cost efficiency, service excellence, and a focus on quality.

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From the health plans of:

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Operating health plans that each offer a vast portfolio of products

• An extensive selection of available high deductible health plan products.

• Experience in effectively administering a wide variety of benefit designs.

• A wide range of deductible options.

• Qualified, HSA-compliant, health plan products that provide against major medical expenses (true insurance).

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The ability to integrate a well-

managed Personal Health Account

option, as part of total offering

• Health Savings Accounts (HSAs)

• Health Reimbursement Arrangements (HRAs)

• Health Flexible Spending Arrangements (FSAs)

• HRA/FSA

• HSA/Limited HRA

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The benefits of our integrated HSA approach

One set of coordinated activities simplifies member enrollment and activation process.

• Electronic eligibility integration; one group bill.

• Electronic, pre-tax, payroll contribution directly to HSA account.

• Three ways to administer claims - via debit card, electronic claims submission or paper submission.

• Seamless service model: “One call does it all.”

• Online ability for members to check their account balance.

• Wells Fargo Bank, N.A. is chosen fiduciary (custodian).

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Coventry’s health plans have long empowered members to become better

engaged consumers of health care.

• Providing easy access to information, both through the About Your Health section of our website and our member newsletter, Living Well.

• Ahead of the curve in providing password-protected, self serve functionality via the internet.

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Coventry has long empowered members to become better engaged consumers of

health care.

• Online Health Risk Assessment tool– Allows members to easily benchmark their wellness, and better

understand their overall health status and risks.

• WebMD®– Provides wellness and disease information to help improve health and

understand ramifications of health decisions.

• Patient Safety– Information on how to help prevent medical errors, take basic steps to

safer health care, and links to other safety related websites.

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Coventry will continue to be a health plan that empowers members to become better engaged

consumers of health care.

Introducing New Decision Support Tools in 2005

• Health Care Tools

– Nurse Advisor Line

– Hospital Quality Comparison tool

• Financial Tools

– Average Unit Cost Comparison tool

– Hospital Relative Cost Comparison tool

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All delivered by health plans that have built a reputation for cost efficiency, service excellence,

and a focus on quality.

Key Service Indicators Through 3Q04 include:

• Telephone Servicing– Average Speed of Answer - 18.4 seconds– Abandonment Rate - 1.4% of calls– Average First Call Resolution - 95.0%

• Claims Processing – Average % inventory over 45 days - 0.2%– YTD Auto adjudication - 76.4%– YTD % of claims received EDI - 61.4%

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All delivered by health plans that have built a reputation for cost efficiency, service excellence,

and a focus on quality.

• Coventry’s health plans have not abdicated their role to help manage the entire population.

• Our integrated approach touches healthy people who need education and reinforcement, chronically ill members who require more hands-on efforts through disease management, to acutely ill and complex patients who need one-on-one attention.New Enrollee /

General Population

Disease / ConditionManagement

Complex CaseManagement

UtilizationManagement

Population

Individual

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It’s easy to get started.

• Employer chooses HDHP, Personal Health Account and contribution levels.

• Coventry works with employer to establish specifications:– Banking and contribution information– Product attributes, order of payment, reimbursement options, fund balance rollover– Plan design preferences & account structure– Works with client to establish payroll interface

• Employees choose:– How to access and use health funds– Personal Health Account investments– Employee contribution levels

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Health Savings Accounts

HSAs allow

• Tax-free contributions by employer or employee.• Tax-free growth of interest or investment earnings.• Tax-free disbursements of principal and interest to pay for qualified

medical expenses. • Accumulation of unused funds and portability between employers.• Flexible use – consumers choose whether or when to use the

account for health expenses, now or after employment.

A consumer-owned, tax-advantaged savings account, created to pay medical expenses, that is always combined with a

qualified high deductible health plan.

The benefit of HSAs is in the consumer incentive (it’s their money!) to better plan and use health care resources.

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• More predictable costs in the near term.

• A legitimate chance to reduce trend.

• Additional peace of mind, in knowing that they are not over-insuring.

• Increased employee satisfaction, through more flexibility, more options, and more ownership of the product called health care.

Advantages of an HSA for Employers

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• More control where/how they spend their money.

• The ability to choose how much they want to contribute to the Account.

• The “triple tax advantaged” nature of the account.

• Account portability, if employee changes employment.

• Popular investment fund options from Wells Fargo Bank, N.A.

• Seamless administration allows for easy monitoring of account.

• Access to information and tools, to help make better decisions.

Advantages of an HSA for Employees

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Contribution Requirements for Health Savings Accounts

• Both the employer and member can contribute funds to the HSA, but neither is required to.

• Both parties can specify whether they want to contribute a bulk sum to the HSA once a year, or make contributions via installments.

• The subscriber can have installment payments deducted directly from his or her paycheck.

• The maximum annual contribution for 2004 is whichever amount is less: 100 percent of the annual deductible or $2,600 for individual coverage and $5,150 for family coverage. Both employer and employee contributions count toward this limit.

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Health Savings Accounts:What are the requirements of an accompanying

Qualified High Deductible Health Plan?

• All services, including Rx, must also be covered after the deductible

– Temporary Rx transition period until 1-1-06.

• Preventive is only exception, allowed to be before or after deductible

– Plan-specific design determinations.

• Plan doesn’t pay until full Family deductible is met– Different than today in most areas of the country.– In-network annual deductible must be at least $1000 for Individual and

$2000 for Family for 2004, indexed annually.

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Requirements of Qualified HDHP, continued.

• Per Preventive Care Safe Harbor (*), need Plan Specific

• Coventry’s definition for HSA Preventive Care:• Preventive Childhood Immunizations • Preventive Adult Immunizations• Adult Physical Exam• Well Child Exam• Well Woman Exam• Routine Mammography

– Certain procedures will always be preventive (based on billed CPT).– Some procedures will be preventive if billed with specific diagnosis

codes (based on billed CPT and diagnosis).– HSA Preventive Care definition is broader than previous definition.

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Requirements of Qualified HDHP, continued.

• All copays (including RX), deductibles and coinsurance all count toward OOP – Different than today.– In-network OOP Max are limited to $5000 for Individual and $10,000 for

Family for 2004, indexed annually.– Prior authorization / financial penalties not required to go to OOP.

• Full family OOP must be met before any family member receives 100% full plan reimbursement– Different than today.

• No limitations provided for min or max deductible or OOP for services Out of the Network

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Requirements of Qualified HDHP, continued.

• No requirement to deliver care through specific delivery mechanism – Can be HMO, PPO or POS Products

• HDHP can be either FI or SF

• HDHP can be an individual or group plan

• Plans administered Contract Year

• No 4th Qtr Deductible Carryover or Deductible Credit

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• Incorporated in 1971 as Administrative Benefits, Inc.

• Leader in benefit administration and consumer directed solutions to insurance carriers and employers.

• Serving 660 employer customers with 400,000+ members. Processed over $550,000,000 worth of claims in 2003.

• Electronic eligibility integration.

• Integrated website with Coventry’s health plans.

• Coventry access to member accounts for additional customer service integration.

Administrator for our integrated approach is Corporate Benefit Services of America, Inc. (CBSA)

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Wells Fargo Bank, N.A. is the chosen fiduciary (custodian) for our HSA offerings.

Wells Fargo offers and manages investment (fund) options for HSA enrollees, and issues the HSA VISA® debit card.

The benefits of our integrated HSA approach: Our Chosen Vendors

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Using Your Health Savings Account Debit Card

• At the pharmacy for either prescriptions or OTC medications, use your debit card to access your HSA funds.

- You will instantly enjoy our negotiated discounts, with no paperwork to file.

- You should present your medical card. The pharmacy will then be able to tell you your financial responsibility.

- If you have met your deductible, you’ll be responsible for only your coinsurance or copayment.

- If you have not met your deductible, the pharmacy will charge you our discounted rate and apply that amount toward your deductible.

-- You can then pay your balance (responsibility) using your debit card.

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Using Your Health Savings Account Debit Card

• At the doctor’s office or hospital, don’t immediately use your debit card.

- Let our process determine exactly what the doctor or facility is owed, based on our negotiated discounts.

- We will send to both you and your provider a notice of your true (discounted) responsibility. Because our system is integrated with that of our HSA administrator, CBSA, we’ll also send notice to them of your out-of-pocket costs.

- We will pay directly to the provider the portion of the claim for which we are responsible, based on our negotiated discount.

- If you have an out-of-pocket responsibility, CBSA will automatically withdraw funds from your HSA, and send you a check (equal in amount to your true responsibility).

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Wells Fargo manages investment options for HSA enrollees

The benefits of our integrated HSA approach: Our

Chosen Vendors

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New Case Implementation Check List

Determine CDHP product & plan design features

Complete the CBSA Group Discovery Document

Coordinate CBSA/Client payroll connection meeting

Complete Group Enrollment form or BenefitExpress set up/BenefitExpress shell

Collect Member Enrollment applications

Collect CBSA supplemental enrollment forms

Review with client administration:- Claims submission process- Billing procedures- Customer Service contact information- Report content, frequency & distribution

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Group Set up - Implementation Discovery Document

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Group Set up - Implementation Discovery Document

• Sales/Broker completes online form:• Employer demographics• Banking and contribution information• Flex Choice plan design options:

- Product stacking- Order of payment- Reimbursement options- Fund balance rollover

• CBSA:• Sets up plan design, preferences & account structure• Works with client to establish funding connections

- Payroll interface- ACH, wire

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Easy Access To Installation Forms:Available online via our website in December, 2004

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New Decision Support Tools in 2005: Nurse Advisor Line

• Accessible to HSA and HRA members via a phone number on their ID cards.

• Registered Nurses available 24 hours a day, seven days a week, 365 days a year to help members make informed decisions on how to proceed with health care services.

– RNs will interpret clinical information, help the member develop a list of questions to ask the physician, and help them to understand the available quality tools and indicators

• Information provided to member based on clinical, quality and cost decision support tools.

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New Decision Support Tools in 2005: Hospital Quality Comparison tool

Powered by HealthShare®First, choose the type of care and

location

Then, choosethe hospitals to

compare

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Hospital Quality Comparison tool, continued

Finally , rank theselection criteria

The result? A customized report

More detailed information in the folders when selected

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New Decision Support Tools in 2005:Average Unit Cost Comparison tool

• Displays the range of, or average, costs for specific procedures by location in our region.

– Physician Office

– Free-Standing Surgery Center

– Hospital Outpatient

• Costs presented are generally all inclusive

– Per Visit to a Physician Office

– Include both Physician and Facility Fees

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New Decision Support Tools in 2005:Hospital Relative Cost Comparison tool

• Compares the relative cost of one facility to that of another facility.

• HealthShare provides these services via their Select Quality Care (SQC) consumer decision support tool product line.

• The tool will be accessed through My Online Services.

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Additional Decision Support Tools:Employee Budgeting Tool

• Allows employee to forecast their health care costs based on specific input they provide.

• Data variables include:– Premium responsibility– Anticipated doctor visits, # of prescriptions, etc.– Model will auto-populate the input fields with experienced-

based average utilization and cost data.

• If accessed through My Group Benefits, benefit plan choices are pre-populated for members.

• Also accessible to members via Member Home page.

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Employee Budgeting

Tool: Step 1 -

Enter Family Information

Starts with the entry of

simple demographic

information about your family

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Utilization assumptions can be

pre-populated or customized by

member

Step 2 - Enter Expected Health Care Needs

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Output 1 - Tool calculates your expected average costs

Summary document shows cost by category of service

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Output 2 - Tool calculates your estimated health care costs

Summary document shows cost by category of service

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Output 3 - Tool calculates your estimated responsibility, by benefit plan

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Output 4 - Tool calculates the impact to your personal health account when integrated with your HDHP

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Output 5 - Tool calculates the out-of-pocket impact of each benefit plan

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Employer Budgeting Tool

• Projects employer contributions and subsequent savings from inception date through 3 renewals.

• Compares the estimated savings, based on user input, for current plan and up to 3 different HRA/medical base plan set up scenarios

• Data inputs include: premium, funding levels, enrollment projections, dual options participation rates, trend, etc.

• Accessible via WellPath’s Employer Home page.

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Employer Budgeting ToolHRA Projection ModelSummary of Annual Savings

1st Year 2nd Year 3rd Year 4th YearComparison Plan(s) Employer Cost $321,932 $373,441 $433,192 $502,502

Scenario 1: (Flex Choice Plan: 35222 - 100/70 w /$1,000 ded)1st Year 2nd Year 3rd Year 4th Year

Employer FlexChoice Premium $272,776 $316,420 $367,047 $425,775HRA Consumption and Other Costs $9,149 $8,545 $6,669 $7,126Employer Other Plan Options $0 $0 $0 $0Total Employer Cost $281,924 $324,965 $373,716 $432,900Employer Savings/(Cost) $40,008 $48,477 $59,476 $69,602

Scenario 2: (Flex Choice Plan: 35224 - 100/70 w /$2,000 ded)1st Year 2nd Year 3rd Year 4th Year

Employer FlexChoice Premium $257,063 $298,193 $345,904 $401,249HRA Consumption and Other Costs $7,465 $6,921 $7,134 $7,438Employer Other Plan Options $0 $0 $0 $0Total Employer Cost $264,528 $305,114 $353,038 $408,687Employer Savings/(Cost) $57,404 $68,327 $80,153 $93,816

Coventry makes no guarantee of the savings calculated in this model. For illustrative purposes only.The results show n are dependent on the assumptions input into the model and are not based on actual experience. Actual results may vary from those show n.Tax implications are not included in this projection.

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