PRIVATE EXCHANGE: THE FUTURE OF EMPLOYEE BENEFITS

Transcription

1 PRIVATE EXCHANGE: THE FUTURE OF EMPLOYEE BENEFITS Ashok Subramanian November 15th, Liazon Corporation

2 WHO ARE WE Pioneer private exchange firm in active market #132 fastest-growing company in America 200 new installs in 2013 alone 200,000+ online transactions over 4 years 300+ broker/consultant partners 30+ medical and ancillary providers HRIS platform-neutral Raised $35 MM from Bain, Bessemer & Fidelity This was not only a smart business decision, it has given our employees greater satisfaction and peace of mind than we could have envisioned. - Bill Wagner, CFO 2 Liazon Corporation

3 PROBLEMS GALORE Healthcare costs have outpaced GDP growth since the 1970s Benefits as a % of compensation have increased from 5% in 1950 to 30-40% today Carriers suffering from market compression, especially among the most profitable membership, and a tightened regulatory environment Employers: Paying more, getting less Employees: Paying more, getting less. Hidden (or notso-hidden) cost shift. Carriers: Margin compression, high churn, dropped coverage slanted toward best risk, and costly/fragmented distribution 3 Liazon Corporation

4 THE CONCEPTS ARE SIMPLE Defined Contribution 1 You give employees money Stop picking people s plans Gain financial predictability & control Private Exchange 2 People go shopping! Big benefits store Technology combines products to yield better, more personalized coverage Personal recommendations based on individual needs and live support Employer role in benefits becomes more like your 401K program 4 Liazon Corporation

5 HOW IT WORKS 1 Defined Contribution: Employer sets $ amount for each employee to spend on benefits Benefits Product Providers (examples) Employer Employees Medical HSA/FSA Vision 5 Benefit administration services to Employers - Account service - EDI/Connectivity - Consolidated Bill / Pay - Reporting 4 Year-round help for employees from Liazon Advisors 3 Shopping: Employees purchase personalized benefits Dental / Life / STD / LTD Supplemental Health Other Telemedicine Pet Insurance Health and Wellness Legal Bright Choices Support Bright Choices Advisors Bright Choices Portal 2 Store Merchandise Standard plan designs Medical: Self or Fully Insured All Other: Typically Fully Insured 5 Liazon Corporation

6 OUR VIEW ON AN EXCHANGE OR MARKETPLACE Exchange components Vision/thought leadership around the paradigm shift toward a retail model in employee benefits Merchandise ( stores ) built around what people need across a full range of products & services Person-friendly user experience Personal purchasing support (online, phone, print) Core value proposition surrounds the person Very different from putting a bunch of plans in an enrollment system Personal assistance to manage risks/expenses year-round (e.g. Simplee) 6 Liazon Corporation

7 THE ESSENCE OF PRIVATE EXCHANGE IS EMPLOYEE CHOICE IN BENEFITS Does employee choice make sense in benefits? 1 Do employees value choice? 2 Can employees successfully navigate choice? 3 Does employee choice work for the employer? Fiscal sustainability Administrative efficiency 7 Liazon Corporation

8 PEOPLE NAVIGATE CHOICE EVERY SINGLE DAY Let s take a look at buying a car Millions of Americans successfully purchase a car based on their needs and wants People value choice in cars People can handle comparison shopping, even without deep technical knowledge You don t need to be a mechanic to buy a car -- Regina Herzlinger Professor, HBS 8 Liazon Corporation

9 LESSONS FROM THE INSURANCE INDUSTRY AUTO INSURANCE Consumer empowerment drives today s auto insurance marketplace. Shoppers Have many options in carrier and in premium and deductible (***equivalence around plan benefits; differences in cost sharing elements) Use online tools which allow for easy comparison between plans Have the power to decide what option is best for them The result? Nearly 100% of consumers express satisfaction with their car insurance whereas only 61% are satisfied with their health insurance Ultimately, it all comes down to customer choice today that choice is rapidly expanding. * *Source: J.D. Power & Associates 2012 US Auto Insurance Study 9 Liazon Corporation

10 EMPLOYEES ALSO VALUE CHOICE IN BENEFITS People behave like consumers when given the opportunity 10 Liazon Corporation

11 EMPLOYEES CAN NAVIGATE CHOICE and over and over again people show that they successfully make choices across a span of products Example: California mid-market client 15 different medical plan designs 2 carriers No more than 18% in any one plan design Limited clustering Choices spanned all plan features (HMOs, PPOs, narrow networks, gatekeepers, etc.) 11 Liazon Corporation

12 CHOICE REQUIRES A 21 ST CENTURY CONSUMER EXPERIENCE Liazon s consumer-friendly guided selection approach makes personalized benefits shopping easy and fun Comprehensively addressing consumers health-related financial exposures can mean further increasing complexity and confusion Consumers should be presented with a recommendation together. *Source: McKinsey & Company Realizing the Potential of the Retail Revolution in Health Insurance. 12 Liazon Corporation

13 CHOICE + DC SPURS GOOD FINANCIAL OUTCOMES FOR EMPLOYER People buy down. 43% of employees chose low-cost medical plans in the lowest-third cost bucket Result Flatten trend-line Large carrier insured block: ~65% MLR Top 1/3 Middle 1/3 Bottom 1/3 Plan features steer people to more cost-efficient behavior Utilization (deductibles, gatekeepers) Unit cost (narrow networks) Wellness features/incentives Large self-insured client: No cost increases for 3 years Facilitate transition to defined contribution w/o simply cost shifting *Source: Liazon data analysis Q Liazon Corporation

14 CONCLUSIONS Adopting a Private Exchange strategy Provides employees w/ comprehensive, flexible coverage Empowers people to make better decisions and utilize benefits more wisely Facilitates shift to defined contribution w/o simply cost shifting It s not Giving up in the battle against healthcare trend A last resort for companies trying to stay in the game The end of mankind as we know it 14 Liazon Corporation