Changing the Paradigm in Employee Benefits A Private Exchange Solution

Transcription

1 Changing the Paradigm in Employee Benefits A Private Exchange Solution February 21, 2013

2 Participants Joe DiBella, Executive Vice President, Managing Director Conner Strong & Buckelew Tom Whitty, Sales Executive Liazon 2

3 Agenda 1) Current Landscape in Employee Benefits 2) New and Emerging Strategies in Benefits 3) Bright Choice Private Exchange 4) Next Steps 3

4 Current Landscape in Benefits

5 Past Present Future Annual cost to provide coverage for a family Average employer share of premium Health spending as % of GDP Number of Americans with a chronic condition The Future $4,000 $21,000 + At current trend rates, annual costs will double in 10 years 76% 78% - 80% Remain steady? 11% 17% 20% by million in million in million in

6 Employers Concerns Weak economy Concerns with the rising cost of employee benefits Cost shifting can only go so far Chronic illnesses not only drive up premiums but drive down productivity Future of health insurance reform and the impact on costs 6

7 Employers Top Challenges in Maintaining Affordable Benefit Coverage Note: Companies were asked to identify their top three challenge. Source: 17 th Annual National Business Group on Health Survey,

8 Employee v. Employer Health Care Costs Per Worker 8

9 2012 Costs for Family of Four City MMI National Percentage Miami $24, % New York City $24, % Chicago $23, % Boston $22, % Philadelphia $22, % Memphis $21, % Minneapolis $21, % Washington DC $21, % Los Angeles $20, % Nationwide $20, % Denver $20, % Dallas $20, % Seattle $19, % Atlanta $19, % Phoenix $18, % Source: 2012 Milliman Medical Index 9

10 New & Emerging Strategies Adoption of contemporary health and wellness strategies based on outcomes Migration to consumer directed, account based plans Custom provider networks based on provider quality and outcomes Transparency tools around cost Value based benefit designs On site primary care services Pharmacy cost containment approaches Expanded contribution arrangements by family size Claim and Dependent Audits Use of technology to educate and inspire Defined contribution approach through a private exchange in place of defined benefit programs 10

11 Changing the Paradigm: Private Exchange Platform

12 Bright Choices Conner Strong & Buckelew has launched its private exchange for clients Customizable and flexible Bright Choices is the exchange platform, powered by Liazon, national leader in private exchange solutions 12

13 Liazon Company Overview Liazon is the market leader in private benefits exchanges 4 years of market experience 2,000+ customers Partnerships with Chambers and Associations Backed by top VC firms Award-winning technology 13

14 A Better Way Employer makes only one strategic decision You decide how much to spend this year per employee and set a predictable budget for 3-5 years Employees buy the benefits they need Shop in an online benefits store Technology combines products to yield better, more personalized coverage Personal recommendations based on individual needs and live support Your role for all benefits starts to look more like how you manage your 401k 14 14

15 The Bright Choices Store Multi-product Exchange provides best opportunity for employer to transition to a Defined Contribution Model Health Plans Single Carrier Multi-plan options (6-10 plans) Meaningful array of choice on price and benefits Other Health and Welfare Benefits (ancillary lines) Single Carrier by line of coverage Multi coverage options Meaningful array of choice and benefits 15

16 Employees have different needs A one-size-fits-all solution doesn t meet them Everyone gets a POS plan, basic dental and company-paid life. My son has asthma, so we see the doctor often. I don t want to think about how much I spend each time. I need to protect my family in case something happens to me. Doctors I don t go much. I want to spend as little as possible on premiums. I haven t built up much in savings, so if I get sick and I m not getting paid, I need a source of income. My favorite doctor doesn t accept insurance. I d like to stop smoking, and I do worry about cancer as it runs in my family. Chris & Family Cost $1,800 Tom Cost $650 Alicia Cost $650 16

17 Bright Choices makes it easy for employees to translate those needs into a Personalized benefits portfolio Employees fill out a simple questionnaire. They get additional educational information and guidance. They receive a personalized recommendation. They pick their portfolio of plans from a range of choices

18 Finding the right protection is about combining the right portfolio of plans for that person or family Alicia Chris & Family Previously $1,800 With Bright Choices cost is $1,300 Tom Previously $650 With Bright Choices cost is $550 Previously $650 With Bright Choices cost is $675 (includes her monthly metrocard) Everyone got what they wanted and total savings are $

19 Case study NJ Professional Services Firm Before Bright Choices With Bright Choices POS $$$$ POS $$$$ HMO 1 $$$ HMO 2 $$ POS HSA $$ HMO HSA $$ HMO HSA $ DENTAL LIFE LONG TERM DISABILITY VISION DENTAL 3 OPTIONS LIFE 10 OPTIONS LONG TERM DISABILITY 3 OPTIONS SHORT TERM DISABILITY 6 OPTIONS CRITICAL ILLNESS ACCIDENT TELEMEDICINE WELLNESS 3 OPTIONS PET 19 19

20 Case Study NJ Professional Services Firm Without Bright Choices Total $404k With Bright Choices Total $281k $299k Premium cost for 23 employees in a POS Plan $342k Annual Renewal had they done the same old $62k Dental, Life, LTD $209k Cost for 23 employees in plan of their choice $72k Dental, Life, LTD plus Vision, Accident, CI, STD, Wellness, Telemedicine and Pet - Employer avoided a $43k rate increase - Employees saved $55k in payroll deductions (+ gain $24k in their HSAs) $24k assumed spent from HSA $185k in premium costs 20

21 Lessons Learned 70,000 Transactions in 5 Years ~100% Different benefits package ~80% Different health insurance plan 90% buy something cheaper People rarely cluster into one or two plans ~75% Dental Insurance Even distribution across plans ~70% Disability Insurance (40% STD; 45% LTD) Even distribution across plans ~65% HSA qualified plans 90% open HSAs ~55% Supplemental Health Insurance (accident, CI, hospital) ~45% Vision Insurance ~40% Life Insurance Dramatic increases in policy amount ~10% LTC, Pet, Tele-Doc, Wellness Programs, etc. In Year 2, 65% keep things the same, 25% evolve, 10% make radical changes 21 21

22 Why it Works

23 Human Behavior Old School Today employees are disconnected from the real cost of coverage They don t really choose They are spending the employer s money, not their own They believe if it costs more, its better and so they choose poorly There is no real engagement 23

24 Human Behavior New School The human behavior changes when someone is spending their own money, not the employers People buy on value and don t just pick the plan that costs the most Americans love to shop and will make better decisions when they shop for themselves on a personalized basis 24

25 For the Employer Employer still has a section 125 qualified, pre-tax benefit plan. The employer: - Predictability in cost - Determines the carrier and funding type (insured or self funded) - Establishes the amount of the defined contribution for their employees - Decides on a menu of various plans to offer their workforce - Offers the private, on-line exchange for employees to use to shop, buy and enroll 25

26 For the Employee Employee still has a section 125 qualified, pre-tax benefit plan. The employee: - Gets to choose the coverages they want and don t want - They get to shop and buy which changes the behavioral experience - They decide, not the employer, so there is skin in the game They enroll on-line via the private exchange 26

27 Will it Cost Less? Defined contribution plans saved most retirement plans The defined contribution model for benefits is intended to change the paradigm in the cost and value proposition for employers and employees - Employers will set the amount they want to pay for benefits in a defined way - Employees will spend and buy differently when it s their money - Workers migrate to less costly plans like consumer directed options and only buy what they need - Employers are likely over buying now - Transparency and value - The model will result in lesser costs over time 27

28 Plan Administration Employers need to determine the value of the defined contribution amount (i.e. $8,000, etc.) The funding type of the plans needs to be determined (i.e. insured or self funded) ANY health carriers/plans can be used on the model Fully insured or self funded All lines of coverage are managed on the exchange, like Rx, dental, vision, life, voluntary, etc. Other traditional plan elements remain like: - Communications - Enrollment - Billing - Wellness 28

29 On-Line Enrollment Engine The Bright Choices exchange includes an integrated on-line enrollment platform Customized per employer Employees shop on-line for the benefits available using the money allocated On going enrollment system Accepts payroll feeds and send enrollment to the carriers 29

30 Administrative Costs There is one-time set up fee to build the Bright Choices exchange per client, generally between $3,000 and $5,000 There are monthly per enrolled employee fees for Bright Choices exchange platform and enrollment technology, ranging from $3 to $6 per enrolled employee per month Annual maintenance costs are approximately $5,000 for system changes 30

31 Consultative Services The conventional services provided by Conner Strong & Buckelew are provided to provide the consultancy and benefits expertise needed - Strategic Advisory - Communications - Data Analytics - Compliance - Advocacy - Communications - Health and Wellness 31

32 Next Steps Consideration of the defined contribution approach Economic modeling and planning Analysis and options 32