A Business Perspective on Health
Care Trends
Presented by Frank Rudolph
Executive Vice President HR, Devon Energy
July 18, 2014
Devon Energy Overview
Company Profile:
• Independent natural gas and oil exploration
• Enterprise Value: $30 billion
• Ticker: DVN (NYSE)
• Employee population: ~5,200
• Headquarters: Oklahoma City
Honors:
• Fortune’s 100 Best Companies to Work For
• Seven consecutive years
• Best Workplaces in Canada
• Four consecutive years
Only energy company to be named to both
U.S. and Canada Great Place to Work lists
• Newsweek’s “Green Rankings”
• Two consecutive years
NYSE: DVN
www.devonenergy.com
page 2
Overview of company and healthcare
benefit programs
Health Plans
• Currently offer low deductible
PPO with $1,000 prevention
benefit
• Adding HSA option in
2015
The DOC
• On-site clinic opened 8/21/13
• Partnership with OU
Physicians
Health
Plans
• DM and large case
management through
medical carrier
Biometrics / HRA
• EE’s receive $30 PEPM
subsidy for completing
both activities
Biometrics
/ HRA
• In 2013, 86% of EE’s earned
the subsidy
NYSE: DVN
www.devonenergy.com
• Unique, one of a kind
clinic that provides
primary, holistic
healthcare to employees
& families
The DOC
The Well
• On-site fitness center
for OKC EE’s
The Well
• Users who go 5+ times per
month receive subsidy for
free membership
page 3
A short history of health care
At Devon
2010
• Congress
passed
health care
reform
(formally
called the
Affordable
Care Act, or
ACA)
NYSE: DVN
2011–2013
• Devon
chose to
grandfather
the Devon
health plan
• Devon
addressed
many ACA
requirements
and closely
monitored
guidance
www.devonenergy.com
2014
2015
• Devon
announced a
new medical
plan option
for 2015
page 4
• Devon
launches two
medical plan
options &
accounts:
• Choice PPO
• Choice
PPO+
What does the company’s population
health profile tell us?
2,400
5.6
4.0
2.9
1,200
800
3.0
2.0
1.5
1.0
0.5
0
0.0
50%
30%
15%
5%
Percentage of Population
NYSE: DVN
www.devonenergy.com
page 5
(1.0 = Avg. U.S. Emp)
1,600
400
5.0
Average Risk Score for
Devon= 1.4
Average Risk Score
Population
2,000
6.0
Healthcare Costs
5% of employees spend
$49,000/yr.
95% of employees spend $2800/yr.
5% of employees take
14 medications
50% of employees take 2
5% of employees have
47 medical tests
50% of our employees have 2
Choose Well. Live Well.
Wellness Center
page 6
Is the DOC having an impact on costs
and utilization?
• Serving Employees vs. Cost Savings
• Preliminary analysis of cost data and risk scores indicates that the
clinic is significantly more efficient at treatment, after adjusting
for differences in risk
The DOC
Primary Care
Visit Only
Community
PCP Visit Only
Both The DOC
and
Community
$1,602
$3,495
$4,237
Average Risk Score of
Members
0.9
1.2
1.7
Efficiency Indicator Cost per Risk Score
$1,847
$2,827
$2,537
Total Cost of Care
*Based on total cost of care for those employees with a primary care visit in the period August 21, 2013 – December 31, 2013
NYSE: DVN
www.devonenergy.com
page 7
Results from a focus on Wellness
(Users of the Fitness Center)
Total OKC
Employee
Population
• 2,006 employees
Frequent Users
(5+ visits/mo.)
Non-frequent Users
(<5 visits/mo.)
• 686 employees
• Average age of 40
• 520 employees
• Average age of 41
NYSE: DVN
www.devonenergy.com
This group provides a
substantial opportunity
to further cost savings
Non-users
• 800 employees
• Average age = 44
• 64% male
page 8
Does frequent fitness center use result
in improved health and lower costs?
Cohorts were
matched on:
Case Cohort
Year 1Biometric
Year 2Exerciser
Year 3Biometric
NYSE: DVN
Control Cohort
•
•
•
•
•
•
Age
Gender
Pre-year biometric
Post-year biometric
Pre-year risk score
Pre-year medical
cost
• Pre-year drug cost
www.devonenergy.com
Year 1Biometric
Year 2Nonexerciser
Year 3Biometric
page 9
Does frequent fitness center use result in
improved health and lower costs?
Risk Scores*
Health Plan Costs*
$5,000
$4,500
$4,000
$3,500
$3,000
$2,500
$2,000
$1,500
$1,000
$500
$0
-19%
Case:
Pre
Case:
Post
+7%
Control: Control:
Pre
Post
2.00
1.80
1.60
1.40
1.20
1.00
0.80
0.60
0.40
0.20
0.00
-3%
Case:
Pre
+6%
Case:
Post
Control: Control:
Pre
Post
* Annual cost per capita and average risk scores from the year prior to their first visit to The Well (pre-year) to the year after their first visit
(post-year)
NYSE: DVN
www.devonenergy.com
page 10
Devon’s ACA Cost Implication
2013
2014
2015
2016
2017
2018
2019
2020
Comparative Effectiveness
Research
$10
$22
$23
$25
$27
$29
$31
$34
Impacts of Health Industry
that may cause indirect
costs to Devon
$148
$157
$162
$168
$208
$219
$181
$194
$39
$41
$44
$47
$50
$53
$57
Coverage for all
dependents up to age 26
$122
$130
$140
$150
$160
$172
$184
Transitional Reinsurance
Fees
$635
$424
$265
$218
$283
$397
$676
$720
$866
(In Thousands)
Individual Mandate
Cadillac Excise Tax – 40%
excise tax on high-cost
plans
Total
NYSE: DVN
$158
$975
$780
www.devonenergy.com
$642
$432
page 11
Summary
• Health care costs for workers in a less healthy population continue
to grow for our business
– Wellness helps but is not the total solution
– Can’t do it through plan design, only through cost control
• Huge tax implications are facing us around the Affordable Care Act
– Cadillac tax
• We have to move employees to a medical home model and
reinforce the importance of using Primary Care Physicians
• Price transparency is going to be demanded from providers
– We have to get best outcomes with lowest price.
• The way we do business in every other aspect so why not healthcare
Choose Well. Live Well.
Wellness Center
page 12