Health Insurance: Yesterday, Today, and Tomorrow

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• Health Insurance Yesterday, Today, and
  Tomorrow

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Yesterday

• When did it all begin?
• 1929 Baylor University Hospital in Dallas, TX.
  About 1,500 school teachers became covered for 21
  days of coverage per year for semi-private room
  and board and necessary hospital services and
  supplies coverage at 200 - 300 maximum
  surgical schedule

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Yesterday

• 1938 added coverage for surgeon fees called group
  surgical expense
• 1943 added coverage for physician charges for
  in-hospital, home and office visits called group
  medical expense
• 1949 Major Medical Expense offered to help cover
  prolonged confinements and expensive procedures
  as a supplement to basic Medical Expense plans

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Yesterday

• 1940 Total US population was 127 million.
• Approximately 12 million Americans (9.4) were
  covered by some form of private health insurance.

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Today

• 2005 Total US population is 297 million.
• Approx 252 million Americans (84.8) have some
  form of health insurance public or private (297
  45 million uninsured).

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Healthcare Cost Trends

• Health Care Costs Went Up Again in 2004

6,857
6,187
76
5,427
4,713
4,276
3,907
Source Hewitt Health Value Initiative (HHVI)
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Healthcare Cost Trends

• Employers Respond With Cost Sharing

Annual Employee Contribution
2,377
2,126
126
1,641
1,311
1,231
1,054
Source Hewitt Associates
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Health Premium Trends
Out-of-Pocket Cost Sharing, 19652000

• Plan participants are picking up a smaller
  percentage of health care costs today than they
  did 20 years ago
• The reduced out-of-pocket costs have led directly
  to increased utilization of the health care system

Source Hewitt Associates
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Health Plan Cost Trends

• 2006 Segal Health Plan Cost Trend Survey
• Increases in projected trend rates for medical
  services and prescription drugs continue to
  decline from peak levels

Source 2006 Segal Health Plan Cost Trend Survey
(August 2006)
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Whats working so far?

• Because or rising costs, very small employer
  groups are canceling group plans and forcing
  employees to purchase individual policies
• Cost-shifting to employees some help from FSAs
• Consumer Driven Health Plans
• Dual Option Multiple Option
• Health Reimbursement Arrangements
• Health Savings Accounts

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Whats working so far?

• Health Awareness for members is critical to
  success of new approach
• Chronic conditions programs
• Case Management for severe conditions
• Smoking cessation
• Newsletters, postcards, emails

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How healthy are you?

• Health Risk Assessments Body Mass Index
  calculation
• BMI weight in pounds/(height in inches x
  height in inches) X 703
• Below 18.5 underweight
• 18.5 to 24.9 Normal
• 25.0 to 29.9 Overweight
• 30.0 Obese
• Modern Healthcare Sept 13, 2005 30 pounds or
  more overweight costs an additional 462 to 2485
  per year in medical expense and work absences

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Consumer Driven Health Plans (CDHP)

• The latest health insurance trend
• Considered a cost savings mechanism
• Require more employee financial involvement
• Designed to change employee behavior
• Maybe business as usual wont work any longer
  (tweaking copays, changing deductibles etc)
• HSAs HRAs are consumerism approaches and appear
  to have potential for longer-term savings.

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Consumer Driven Health Plans

• Forrester Research predicts CDHPs to account for
  400 Billion in premiums and 25 market share by
  2010!

Source Forrester Research, 2003
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HSA vs. HRA
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Tomorrow CDHP Plan Offerings
Health Reimbursement Arrangement
Health Savings Account
Likely to offer an HRA-based CDHP in 2006
Likely to offer an HSA- based CDHP in 2006
Mercers 2004 National Survey of
Employer-Sponsored Health Plans
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Tomorrow Employer Plan Trends

• Millimans 2004 Group Health Insurance Survey
  (of carriers)
• 2003 survey
• 48 offer a High Deductible Plan
• 29 offer a Consumer Plan
• 2004 survey
• 96 offer a High Deductible Plan
• 89 offer a Consumer Plan
• Health insurance executives expect
• 7.8 of 2005 group premium to be attributable to
  their CDH products versus 3.2 in 2004.

October 2004
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Impact of CDHPs on Marketplace

• Are CDHPs simply a shift in cost from employer to
  employee? It will take some more time to learn
  their impact on reducing healthcare costs and to
  find answers to the following
• Will consumers take a more active role and become
  more prudent users of healthcare services?
• By placing more emphasis on member choice, does
  that reduce bargaining power?
• Will these plans attract primarily healthier,
  low-cost individuals and have no real effect on
  sicker families?

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Tomorrow?

• Single payer initiatives
• Additional federal and/or state mandates
• Global legislation such as COBRA/HIPAA
• Additional pressures from provider community
• Medical liability issues
• Many mergers/acquisitions happening now could
  change the climate significantly

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• THANK YOU!