June 24, 2008

Keenan HealthCare Releases 2008 Hospital Survey Findings

Keenan HealthCare today released the findings of its 2008 Health Care Strategy Survey. This survey, conducted across 80 health care organizations representing over 200 hospitals across California, reviews the status of health care benefits within the health care industry.

"As a health care consulting and brokerage firm, it is important for Keenan to understand the health care industry's most pressing issues. By surveying hospitals and health care organizations statewide, we are able to identify common challenges of health care benefits costs shared across the industry throughout California," said Steve Richter, Senior Vice President, Keenan HealthCare.

The survey's key findings include:

1) California hospitals saw a 6% increase in medical benefit costs for 2008. Despite this relatively low increase, 79% of the participants believe that managing the cost of the medical benefits will be their most significant benefit program challenge for the 2009-2010 period. The annual medical benefit cost per covered employee in 2008 has risen to over $8,600 from $8,100 in 2007.

-- The average 2008 cost increase ranges from 3% to EPO programs to 9% for POS programs. The average increases for HMO and PPO programs are 6%.

-- Health care organizations continue to bear most of the increasing costs, with 65% offering a medical plan at no cost for the employee.

-- Retiree medical coverage is offered by 39% of those surveyed. While many non-health care employers are reducing or dropping retiree medical coverage, the benefit is actually growing among health care organizations.

2) California hospitals are using a variety of strategies to manage the medical benefit costs, including:

-- Self Funding - 60% of the health care organizations are self funded (vs. 40% fully insured). This is similar to 2007.

-- Eligibility Management - 59% of the organizations are, or plan to, require employees to provide proof of dependent eligibility (e.g., marriage license, birth certificate, etc.) as a cost reduction strategy.

-- Health Management programs ranging from wellness to disease management and predictive modeling are in place at 84% of the health care organizations surveyed. Twenty percent of hospitals plan to implement new programs in 2009. Lifestyle (69%) and disease management (58%) programs are the most popular.

-- Consumer Directed Health Plans (CDHP) enrollment in HRA and HSAs is less than 1%. Eleven percent have an HRA or HSA offering, but enrollment lags that significantly.

3) There are significant regional variations in health plan offerings. In Southern California, 60% of employees are in HMOs and 25% in PPOs. In Northern California, 28% are in HMOs and 52% are in PPOs. On a statewide basis, 44% are in HMOs and 37% in PPOs.

-- The average annual cost per employee varies significantly from region to region within California. Southern California's annual cost per employee is $7,296 and conversely, San Francisco is significantly higher at $10,655 per year.

4) California hospitals are finding "better practices" that are linked to employee engagement in health management/wellness programs. Participation rates were highest in those organizations with CEO engagement, employee listening (focus groups, surveys), a formal wellness strategy, or a hospital branded program.

"These findings are the most comprehensive published for California health care organizations," according to Richter. "It provides an excellent benchmark for Chief Financial Officers, Human Resource executives and Benefit Managers, and others in comparing their employee benefit programs to those in the marketplace."

For a copy of the Executive Summary, of for more information on minimizing healthcare costs, please send a request to Tim Crawford: [email protected]

About Keenan & Associates

Keenan & Associates, headquartered in Torrance, Calif., was founded in 1972. Keenan has grown to the 17th-largest insurance consulting and brokerage firm in the United States. With a network of offices located throughout California and a staff of more than 650 insurance specialists, Keenan is a full-service consultant and broker, dedicated to providing superior insurance products and services for public agencies and health care organizations. The company's exceptional growth is directly related to its concentration on meeting the risk management, employee benefits, workers' compensation and property & liability consulting and brokerage objectives of public entities, health care systems and high-tech firms. For more information, visit www.keenan.com