Holmes Murphy & Associates · Average Annual Premiums for Single and Family Coverage, 1999-2012 *...

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October, 2013

1

Copyright © 2013 by Holmes Murphy & Associates

Agenda

2

- What’s the problem?

- What’s the cost?

- For the country

- For employers


Solving a Problem It Didn’t Create

4

80.0

81.0

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83.0

84.0

85.0

86.0

87.0

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89.0

90.0

Breast Cancer 5-Year Survival Rate

Source: OECD Health Data 2011; WHO Global Health Expenditure Database.

Average Annual Premiums for Single and Family Coverage,

1999-2012

* Estimate is statistically different from estimate for the previous year shown (p<.05).

Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 1999-2012.

$15,745*

Cumulative Increases in Health Insurance Premiums, Workers’ Contributions to Premiums, Inflation, and

Workers’ Earnings, 1999-2012

38%

109%

172%

38%

113%

180%

11%

29%

47%

8%

24%

38%

0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

200%

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Health Insurance Premiums

Workers' Contribution to Premiums

Workers' Earnings

Overall Inflation

Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 1999-2012. Bureau of Labor Statistics, Consumer Price Index, U.S. City Average of Annual Inflation (April to April), 1999-2012; Bureau of Labor Statistics, Seasonally Adjusted Data from the Current Employment Statistics Survey, 1999-2012 (April to April).


Healthcare As A Percentage of GDP

7

17.9

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

20.0

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Healthcare Expenditures as a Percentage of GDP by Country

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Healthcare Reform 2,700 Pages on One Page

8

Access •Exchanges

•Medicaid expansion

•No medical underwriting

•No lifetime or annual maximums

Cost

•Exchange subsidies

•Medicare inflation cap

• Small business tax credits

•3 to 1 Age-banding

•Medical Loss Ratio

Quality •Accountable Care Organizations

•Comparative Effectiveness

Accountability • Individual mandate

•Employer mandate

• State Medicaid expansion


Obamacare

reduces

the federal

deficit

We must

defund

Obamacare


Annual Income $23,030

Annual Spending $36,030

New Debt Added This Year $13,000

Credit Card Balance $101,280

Mortgage $633,000

Meet the Washingtons

Annual Income $2,303,000,000,000

Annual Spending $3,603,000,000,000

New Debt Added This Year $1,300,000,000,000

Debt Held by Public $10,128,000,000,000

Unfunded Soc. Sec. / Medicare Liability $63,300,000,000,000

Multiply the Washingtons by 100,000,000 and

you have the 2011 United States federal budget


PPACA Insurance Provision Funding

12

Gross

Cost, $1,797

Gross Income and Savings, $437

$-

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

$2,000

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

$ B

illi

on

Year

Insurance Coverage Provisions of PPACA 2014-2023

Gross Cost

Gross Income and Savings

Source: Congressional Budget Office, May 2013

Net increase in

spending of

$1.36 trillion


Changing Nature of Federal Spending

13

9.1 10.8

19.1

11.2 10.0

7.1

1973-2012 2013 2038

Spending Under CBO's Extended Baseline Percentage of Gross Domestic Product

Soc. Sec., Health, Interest All Other


Changing Nature of Federal Spending

• Spending on Social Security, health programs, and interest will consume 110% more of the federal government budget

• All other government programs will receive 37% less of the federal government budget

14

110%

-37%

-60% -40% -20% 0% 20% 40% 60% 80% 100% 120%

Change in Percentage of Budget

Soc. Sec., Health, Interest All Other


Paying It Forward

• 2012 federal government income from all sources was 15.2% of GDP

• Funding only Social Security, health programs, and interest alone will require a 25.7% increase in taxes

• Funding all federal government programs will require a 72.4% increase as a percentage of GDP

15


Healthcare Reform Expenses and Revenues

16

$0

$1

$2

$ T

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$ T

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17

$1.8 Trillion in new spending

$0

$1

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$ T

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18

$1.8 Trillion in new spending

$0

$1

$2

$ T

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$0

$1

$2

$ T

rillion

Fees, Penalties, and Tax Effects

$.44 Trillion



19


$.44 Trillion

$0

$1

$2

$ T

rillion

$0

$1

$2

$ T

rillion

$1.80 Trillion in New Spending

Medicare Hospital and

Advantage Cuts $.74 Trillion


3

1

Source: Avalere Health analysis of American Hospital Association Annual Survey data, 2010, for community hospitals. (1) Includes Medicaid Disproportionate Share payments.

89.4%

99.1%Medicare

80.1%

94.5%

Medicaid(1)

127.8%

115.7%

Private Payer

70%

80%

90%

100%

110%

120%

130%

140%

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10

133.5%

92.8%

The Government to Private Cost Shift

20

Medicare and

Medicaid reimburse

hospital systems at

less than the actual

cost of services

2

Private payers

subsidize the

government programs

through higher

hospital payments

PPACA reduces

funding to Medicare

by $741 billion

© 2013 Holmes Murphy & Associates Confidential


21

$28,263

$43,852

$58,854

$117,616

$160,832

$11,821

$15,310 $15,143 $15,368 $12,643

$-

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

$160,000

$180,000

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Medicare Paid

DFW Area Average Billed Charges and

Medicare Paid for Lower Extremity

Major Joint Replacement



22


$.44 Trillion

$0

$1

$2

$ T

rillion

$0

$1

$2

$ T

rillion

$1.80 Trillion

in New Spending

Medicare Hospital and

Advantage Cuts $.73 Trillion

New Medicare Taxes and

Industry Fees $.57 Trillion


Medicare Is Running… Annual Deficits

• Medicare HI Trust assets were $220.4 billion at the end of 2012

23


Medicare Is Running… Toward Insolvency

24

Medicare Trustee report

forecast prior to PPACA

2103 Medicare Trustee

report forecast


Medicare Accounting

25

“In practice, the improved Part A financing cannot be simultaneously used to finance other Federal outlays (such as the coverage expansions under the PPACA) and to extend the trust fund, despite the appearance of this result from the respective accounting conventions.” Solomon Musey, A.S.A. Office of the Actuary Centers for Medicare and Medicaid Service April 22, 2010


Solving the Problem for the Country

27



28


Medicare Knows the Savings Caps Are Very Likely Unachievable

29 Medicare Trustee Report 2013, p 213



30


Percentage of Poverty Examples 2013

Persons in FPL

family 100% 133.01% 150% 200% 250% 300% 400%

1 $11,490 $15,283 $17,235 $22,980 $28,725 $34,470 $45,960

2 $15,510 $20,630 $23,265 $31,020 $38,775 $46,530 $62,040

3 $19,530 $25,977 $29,295 $39,060 $48,825 $58,590 $78,120

4 $23,550 $31,324 $35,325 $47,100 $58,875 $70,650 $94,200

5 $27,570 $36,671 $41,355 $55,140 $68,925 $82,710 $110,280

6 $31,590 $42,018 $47,385 $63,180 $78,975 $94,770 $126,360

7 $35,610 $47,365 $53,415 $71,220 $89,025 $106,830 $142,440

8 $39,630 $52,712 $59,445 $79,260 $99,075 $118,890 $158,520

Maximum Annual Premium Within Exchange

Plan Value 94% 94% 87% 73% 70% 70% 70%

# in Family 2.00% 3.00% 4.00% 6.30% 8.05% 9.50% 9.50%

1 $230 $458 $689 $1,448 $2,312 $3,275 $4,366

2 $310 $619 $931 $1,954 $3,121 $4,420 $5,894

3 $391 $779 $1,172 $2,461 $3,930 $5,566 $7,421

4 $471 $940 $1,413 $2,967 $4,739 $6,712 $8,949

5 $551 $1,100 $1,654 $3,474 $5,548 $7,857 $10,477

6 $632 $1,261 $1,895 $3,980 $6,357 $9,003 $12,004

7 $712 $1,421 $2,137 $4,487 $7,167 $10,149 $13,532

8 $793 $1,581 $2,378 $4,993 $7,976 $11,295 $15,059

Federal Poverty Level (FPL) Thresholds 100%-400% of FPL Premiums

Gov’t subsidy fixed on 2nd lowest “silver” plan



Persons in FPL

family 100% 133.01% 150% 200% 250% 300% 400%

1 $11,490 $15,283 $17,235 $22,980 $28,725 $34,470 $45,960

2 $15,510 $20,630 $23,265 $31,020 $38,775 $46,530 $62,040

3 $19,530 $25,977 $29,295 $39,060 $48,825 $58,590 $78,120

4 $23,550 $31,324 $35,325 $47,100 $58,875 $70,650 $94,200

5 $27,570 $36,671 $41,355 $55,140 $68,925 $82,710 $110,280

6 $31,590 $42,018 $47,385 $63,180 $78,975 $94,770 $126,360

7 $35,610 $47,365 $53,415 $71,220 $89,025 $106,830 $142,440

8 $39,630 $52,712 $59,445 $79,260 $99,075 $118,890 $158,520


Plan Value 94% 94% 87% 73% 70% 70% 70%

# in Family 2.00% 3.00% 4.00% 6.30% 8.05% 9.50% 9.50%

1 $230 $458 $689 $1,448 $2,312 $3,275 $4,366

2 $310 $619 $931 $1,954 $3,121 $4,420 $5,894

3 $391 $779 $1,172 $2,461 $3,930 $5,566 $7,421

4 $471 $940 $1,413 $2,967 $4,739 $6,712 $8,949

5 $551 $1,100 $1,654 $3,474 $5,548 $7,857 $10,477

6 $632 $1,261 $1,895 $3,980 $6,357 $9,003 $12,004

7 $712 $1,421 $2,137 $4,487 $7,167 $10,149 $13,532

8 $793 $1,581 $2,378 $4,993 $7,976 $11,295 $15,059



$70,650

x 9.5%

= $6,712



Persons in FPL

family 100% 133.01% 150% 200% 250% 300% 400%

1 $11,490 $15,283 $17,235 $22,980 $28,725 $34,470 $45,960

2 $15,510 $20,630 $23,265 $31,020 $38,775 $46,530 $62,040

3 $19,530 $25,977 $29,295 $39,060 $48,825 $58,590 $78,120

4 $23,550 $31,324 $35,325 $47,100 $58,875 $70,650 $94,200

5 $27,570 $36,671 $41,355 $55,140 $68,925 $82,710 $110,280

6 $31,590 $42,018 $47,385 $63,180 $78,975 $94,770 $126,360

7 $35,610 $47,365 $53,415 $71,220 $89,025 $106,830 $142,440

8 $39,630 $52,712 $59,445 $79,260 $99,075 $118,890 $158,520


Plan Value 94% 94% 87% 73% 70% 70% 70%

# in Family 2.00% 3.00% 4.00% 6.30% 8.05% 9.50% 9.50%

1 $230 $458 $689 $1,448 $2,312 $3,275 $4,366

2 $310 $619 $931 $1,954 $3,121 $4,420 $5,894

3 $391 $779 $1,172 $2,461 $3,930 $5,566 $7,421

4 $471 $940 $1,413 $2,967 $4,739 $6,712 $8,949

5 $551 $1,100 $1,654 $3,474 $5,548 $7,857 $10,477

6 $632 $1,261 $1,895 $3,980 $6,357 $9,003 $12,004

7 $712 $1,421 $2,137 $4,487 $7,167 $10,149 $13,532

8 $793 $1,581 $2,378 $4,993 $7,976 $11,295 $15,059



$35,325

x 4.0%

= $1,413

Bob earns $35,325 per year as his

family’s only breadwinner

Bob’s employer charges $100 per

month for single coverage but

doesn’t subsidize dependents

“Affordability” for Bob’s employer

health plan is $280 per month or

$3,356 per year

Family coverage costs $1,100 per

month or $13,200 per year

No one in Bob’s family is eligible

for a subsidy


A Peek at the Exchange Cost

34

$2,312

-$1,000

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59 61 63

An

nu

al T

ota

l $

Age

Dallas/Fort Worth AreaExchange Subsidies and Net CostSingle - $28,725 Annual Earnings

Subsidy Net Lowest Bronze Net 2nd Lowest Silver Net Lowest Gold



35

$2,553

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59 61 63

An

nu

al T

ota

l $

Age

Dallas/Fort Worth AreaExchange Subsidies and Net CostSingle - $45,960 Annual Earnings




36

$2,967

-$5,000

$0

$5,000

$10,000

$15,000

$20,000

21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59 61 63

An

nu

al T

ota

l $

Age

Dallas/Fort Worth AreaExchange Subsidies and Net Cost

Family of 4 - $47,100 Annual Earnings




37

$6,712

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59 61 63

An

nu

al T

ota

l $

Age

Dallas/Fort Worth AreaExchange Subsidies and Net Cost

Family of 4 - $70,650 Annual Earnings



Budget Projection Sources of Health Insurance

38


Medicaid and CHIP $710

Exchange Subsidies $1,073

Small-Employer Tax Credits

$14

Coverage Expansion Increases in Spending ($ Billion)


The 5% Scenario

39

Assumed Enrollment

– The CBO assumes that more Americans will receive their health insurance through their employer in 10 years than do so today

– A recent survey of large employers found that 28% of employers still expect to be providing health insurance in 10 years

– What if 5% of employers per year stopped providing health insurance?

Assumed Inflation

– Average employer-based health insurance premiums rose 7.6% per year over the past decade after plan changes

– The CBO projects the average premium to increase 2.8% per year without plan reductions

– What if premiums increase 5% per year over the next decade?


Use: Number of Covered Enrollees

40

American Insurance Enrollment (millions)

2013 2023 Change

Medicaid and CHIP 36 47 11

Employer 158 162 4

Nongroup and Other 25 23 -2

Exchanges 0 24 24

Uninsured 55 31 -24

Total 272 287 15


Employer Sponsored Insurance

U.S. Nonelderly Population

1999/2000 2010/2011 Change

Percentage 69.7% 59.5% -14.6%

Number 170,456,000 159,027,000 (11,429,000)


Use: Enrollment Assumptions

41

157 162

7

2443

31

0

50

100

150

200

250

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Po

pu

lati

on

in

Mil

lio

ns

Year

CBO Population Assumption

Employer-Based

Public Exchange

Uninsured

157

99

7

81

43

37

-

50

100

150

200

250

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Po

pu

lati

on

in

Mil

lio

ns

Year

Alternative Scenario

Employer-Based

Public Exchange

Uninsured


Price: Average Annual Subsidy Per Enrollee

42

$5,290

$7,900

$-

$3,000

$6,000

$9,000

$12,000

$15,000

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

An

nu

al S

ub

sid

y P

er

Enro

llee


Price: Insurance Inflation and Subsidies

43

$13,997

$10,412

$5,290

$7,900

$-

$3,000

$6,000

$9,000

$12,000

$15,000

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

An

nu

al S

ub

sid

y P

er

Enro

llee

Subsidy @ 10 Yr Avg

Alt Scenario @ 5%

CBO Subsidy


Use x Price: Cost Impact of 5% Scenario

44

$3,432

$1,073

$-

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

$ B

illio

ns

Exchange Subsidy Spending 10 Year Impact

5% Scenario

CBO Baseline


Finding Additional Funds to Fill the PPACA Shortfall

45



46


Medicare Trustee Reports 2009 vs 2013 Per Beneficiary Hospital Cost

47

$3,000

$3,500

$4,000

$4,500

$5,000

$5,500

$6,000

$6,500

$7,000

2009 Report

2013 Report

$3,000

$3,500

$4,000

$4,500

$5,000

$5,500

$6,000

$6,500

$7,000

2009 Report

2013 Report


Medicare Trustee Reports 2009 vs 2013 Per Beneficiary Hospital Cost

48

$3,000

$3,500

$4,000

$4,500

$5,000

$5,500

$6,000

$6,500

$7,000

2009 Report

2013 Report


The Government to Private Cost Shift

49

Medicare /

Commercial

inflation gap

Medicare

Inflation

Commercial

Inflation


50

$4,518

$2,033

$869

$724

$- $1,000 $2,000 $3,000 $4,000 $5,000

Covered

55% Discount

Medicare + 20%

Medicare Paid Kansas City Region Level II Cardiac Image

$4,304

$1,937

$836

$697

$- $1,000 $2,000 $3,000 $4,000 $5,000

Covered

55% Discount

Medicare + %

Medicare Paid St Louis Region Level II Cardiac Image


Health Care Reform Impact Employer Decisions

I’m Out!

I’m In!

No Man’s Land

Increase Health Responsibility

Aggressive Wellness

Clinical Compliance

Insure My Risk

Define My Contribution

Shift Financial Responsibility

Risk Improve It Shift It

52

Age-Adjusted Prevalence of Obesity and Diagnosed Diabetes

Among U.S. Adults Aged 18 Years or older

Obesity (BMI ≥30 kg/m2)

Diabetes

1994

1994

2000

2000

No Data <14.0% 14.0-17.9% 18.0-21.9% 22.0-25.9% >26.0%

No Data <4.5% 4.5-5.9% 6.0-7.4% 7.5-8.9% >9.0%

CDC’s Division of Diabetes Translation. National Diabetes Surveillance System available at

http://www.cdc.gov/diabetes/statistics

2010

2010


Attack disease

as the enemy Pass burden to

shareholders, taxpayers,

or customers

Pass burden

to employees

Pressure on the Employer’s Doorstep

Employer

Network

Produce

Disease

Medical

Providers

Variable

Quality

Gov’t

Cost

Shifting

U.S.

Health

Status

Price Use


Solving the Problem for Employers


Metabolic

Syndrome

Clusters of Risk Can Create

a Toxic Recipe

7x more likely to get diabetes

3x more likely to get

heart disease

High

blood

pressure

Low

HDL (good)

cholesterol

High

triglycerides

High

blood

sugar

High

waist

circumference

2x more likely to have a stroke

4x higher medication spend

2x more lost work days

We can reverse MetS and produce less heart

attacks, strokes, diabetic events and cancer

Alzheimer’s

Cataracts

Sleep Apnea

Breast Cancer

Heart Attack

Gall Bladder

Disease

Nonalcoholic

Fatty Liver

Disease

Pancreatitis

Pancreas Cancer

Diabetes

Kidney

Disease/Cancer

Ovarian Cancer

Urinary Tract

Cancer

Psoriasis

Arthritis

Gout

Depression

Stroke

Retinopathy

Esophagus

Cancer

Cardiovascular

Disease

Congestive Heart

Failure

Hypertension

Pulmonary

Disease

Colorectal Cancer

Erectile

Dysfunction

Gynecological

Abnormalities

Endometrial

Cancer

Non-Hodgkins

Lymphoma

Leukemia

Disease Risk Associated With

Metabolic Syndrome Elements


Summary of Screenings Fall Screenings 2008 to 2012

Year Total

Screened % Mets Employees Screened % MetS

Spouses Screened % MetS

2008

2,701 26%

2,701 26% * *

2009

4,078 27%

2,834 21%

1,244 34%

2010

4,329 22%

3,000 19%

1,329 29%

2011

3,997 20%

2,737 19%

1,260 26%

2012

3,562 16%

2,449 15%

1,113 18%

60

*Spouses were not part of the program in 2008


Genesis Health System

Annual Medical Plan Cost per Covered Employee

Red Line Reflects Genesis 2006 Costs Trended Using The Average Overall Annual

Health Care Cost Increase From the Aon Hewitt Annual Medical Trend Surveys

$556 $623 $693 $723 $758 $798 $846

$7,146 $7,009 $6,723 $6,719

$7,106 $7,222 $7,594

$1,172 $1,409 $1,358 $1,344 $1,585 $1,481 $1,390

$1,659

$7,632

$1,909 $2,045

$7,442

$1,794

$7,865

$1,861 $2,020 $2,190

$7,702

$8,553 $9,464

$10,462 $11,571

$12,711

$13,792

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

2006 Costs 2007 Costs 2008 Costs 2009 Costs 2010 Costs 2011 Costs 2012 Costs

Plan Fees Genesis Pd Claims

Empl Pd Claims Empl Contributions

$8,439

$8,021

$7,416


Solving the Problem for Employers


Questions

64

Holmes Murphy & Associates · Average Annual Premiums for Single and Family Coverage, 1999-2012 *...

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