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Total Health Management:“On the Verge”

New York Business Group on Health

January 22, 2010

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Total Health ManagementEffectively Addressing Key Business Issues

Total Health Management is all of the actions an employer can take to

engage and support management and employees in making good choices to avoid the cost and consequences of poor health

ReducedCost

Competitive Advantage,Positive Company Image

IncreasedProductivity

Healthierand SaferWorkforce+ + =

The Solution:A Total Health

Management ApproachThe Problem:

Health risks and conditions are leading to

increased costs of doing business and affecting companies’ ability

to effectively deploy talent on a day-in and day-out basis in the US and across the globe

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Total Health ManagementAddressing the Entire Health Care Continuum

Optimized health, safety and productivity

Managed costs

Wise allocation and use of resources based on local needs and infrastructure

Alignment with broader total rewards and/or talent management strategies

Maximized ROI

THM componentsStrategyDesign

EngagementIntegration

Measurement

A Health and Human Capital Approach:

Global Vision

Locally Deployed

Flawlessly Executed

To achieve the following objectives

WellProductive, low health

care users

At RiskCurrently productive,

potential high cost claimants

Illness / InjuredLimited to no productivity,

high medical costs

CatastrophicHigh cost users, poor

prognosis

Health and Safety Risk Management

Chronic Condition and

Case Management

High Cost Case Management

Occ and Non-Occ Absence and

Disability Management

Health& Safety

Promotion

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– There are many untapped opportunities We can address the “hidden”

costs associated with poor health (such as at risk, illness, injury) with a comprehensive and integrated approach

– Manage total health to achieve total value

Reducedcost

Competitive advantage,Positive company image

Increasedproductivity

Healthierworkforce

+ + =

The Hidden Costs of IllnessEstimated indirect cost of absences = 2% of payroll

+

* Assumptions:• For an employer with 5,000 employees and average salary of $47,060

* Survey results:• Average salary: $47,060 • % electing employer coverage: 84% • % with dependent coverage: 56% • Average employee age: 41 years • % females/males: 53%/47%

Source: Mercer’s 2008 National Survey of Employer-Sponsored Health Plans and Mercer’s 2007 Survey of Health, Productivity and Absence Management Programs

$49M Health & Absence Costs*

$235M Payroll* Payroll

Direct non-occupational absence costs = 2.7% of payroll

Health care benefits costs = 16% of payroll

Equals more than 20% of payroll

The Total Health Management OpportunityTotal savings of 1 – 2% of payroll (~ $1Million/1,000 employee)

Marketplace Trends

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Total Health Management Marketplace Trends

Intensive Upstream Cost Risk Reduction

Access to “Top” Docs and Facilities (COEs)

Focused Treatment Compliance

Integrated Medical/ Disability Case Management and Return to Work/Health

Bio-psychosocial Approach to Risk Reduction

Targeted Behavior Modification and Condition Management

Evidence-Based Decisions

Awareness

Prevention and Early Detection

Healthy Lifestyle Promotion

Linkage to Safety

Key Tactics

Reinforcement through Incentives, Plan Design and Communications

WellProductive, low health

care users

At RiskCurrently productive,

potential high cost claimants

Ill / InjuredLimited to no

productivity, high medical costs

CatastrophicHigh cost users, poor

prognosis

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Marketplace TrendsMercer Health Care Survey

Established in 1986, national probability sample used since 1993

2,914 employers participated in 2009

All employers with 10 or more employees are surveyed using a stratified random sample; large employers are oversampled to permit robust break-outs by size

In this presentation, we refer to:- Small employers – 10-499 employees - Large employers – 500+ employees- Jumbo employers – 20,000+ employees

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Jumbo employers

All large employers

Health management 71% 85%

Consumerism 64% 77%

High-performance networks 41% 51%

Collective purchasing 37% 29%

Scaling back benefits/shiftingcost to employees 37% 21%

Back in 2006: Health management and consumerism emerge as large employers most important cost-management strategies for the next five years*

* Employers indicating strategy will be significant in efforts to manage health benefit cost.

Source: Mercer’s National Survey of Employer-Sponsored Health Plans 2006

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$250

$1,000

22%

49%

2000 2009

Cost-shifting among large employers more moderate than among small employersPPO individual in-network deductible

$250

$400

19%

37%

2000 2009

Percent of employersrequiring NO in-networkdeductible

Median individualdeductible amount

Small employers Large employers

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Sharp growth in use of health management programsPercent of large employers offering programs and offering incentives

65%

73%

71%

51%

53%

78%67%

30%

53%

35%

20062009

Health risk assessment

Disease management program

Behavior modification

Health advocate services

Nurse advice line

52%

37%

19%

13%

Participation in or completion of a behavior modification program

Seeking preventive care / screenings

37%15%Participation in a disease management program

51%23%Completing a Health Risk Assessment

Jumbo employers

Large employers

Use incentives with specific health management programs offered (Among large employers offering program)

52%

37%

19%

13%

Participation in or completion of a behavior modification program

Seeking preventive care / screenings

37%15%Participation in a disease management program

51%23%Completing a Health Risk Assessment

Jumbo employers

Large employers

Use incentives with specific health management programs offered (Among large employers offering program)

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All large Jumboemployers employers

Provide health management programs through specialty vendor/request optional services from health plan vendor 37% 73%

Of those, % of employers that have attempted to measure return on investment (ROI)* 45% 69%

Of those, % of employers that are satisfied with ROI 74% 75%

*Among employers that offer disease or health management programs

Return on investment in health managementLarge employers

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Innovative Approaches

Surgical centers of excellence 57% 16% 17%

Retail clinics for chronic care mgmt 45% 8% 12%

Treating tele-mediatedphysician care as eligible expense 43% 6% 3%

Medical homes (A-ICU model) 53% 10% 1%

Tiering of non-drug treatments 49% 6% 2%

Very interested

Interested/very interested

What the largest employers are considering

for the next five years

Already use strategy

Employers with 5,000 or more employees

Have incorporated evidence-based (or value-based) design in one or more medical plans

Jumbo employers that waive/reduce cost-sharing for:

Maintenance drugs: 17%

Specific drug therapies proven to be cost-effective: 11%

Non-drug treatments proven to be effective: 2%

Other form of EBD used: 6%

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