Increasing the Value of your Group Benefits Plan and Administration

Transcription

1 Increasing the Value of your Group Benefits Plan and Administration Presented by: Laura Mensch, VP Insurance Solutions Mary Anderson, Product Manager

2 Canadian Employers face constant challenges that make it difficult to ensure long range sustainability and affordability Challenges in: Controlling benefit plan costs Effectively communicating their benefit offerings Ensuring compliance with all the government regulations imposed on them. Common approaches of controlling benefit costs tend to focus on coverage reductions, which provide short term relief but do not address the root causes or employee needs. Employers need to switch their focus to: Developing short and long range plan strategies that align with business objectives Establishing operational governance standards and processes for the plan to ensure due diligence is consistently met and exceeded

3 Today s Objective To provide you with insight and meaningful actions that can be implemented to optimize your benefits plan

4 Agenda Challenges or Opportunities? Market Trends Plan design Plan management Technology Future Vision

5 An uncertain economy has increased the value and awareness of health benefits Canada s troubled healthcare system May 05, 2011 Benefits being scaled back amid recession Globe and Mail, May 29, 2009 Healthcare costs to skyrocket April 06, 2011 Benefits in Crisis - Weathering Economic Climate Change April 2009

6 Healthcare costs represent a significant portion of a country s total expense ranging from 6% to 16% of GDP Healthcare Expenditure (%GDP) 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% Australia Canada France Germany Japan Mexico UK US Public Expenditure Private Expenditure average (Source: OECD Healthcare Data, 2009)

7 Healthcare inflation generally exceeds general inflation creating an unsustainable model 10.0% 8.0% Inflation 6.0% 4.0% 2.0% 0.0% 2.0% Australia Canada France Germany Japan Mexico UK US Healthcare Inflation General Inflation average (Source: OECD Healthcare Data, 2009)

8 Governments historically pay a significant portion of healthcare costs which cannot continue indefinitely 90.0% 80.0% Government Funding 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% Australia Canada France Germany Japan Mexico UK US For calendar year 2007 (Source: OECD Healthcare Data, 2009)

9 Demographic changes, in the form of aging boomers, will stretch the system to its max 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% < Source: Statistics Canada, May 2011

10 In Canada, the rate of healthcare cost increase continues to trend at ~15% higher than any other business cost Overall Blended Total Trend % 13.80% 13.20% 13.94% 13.76% 14.81% 15.00% % 5% 10% 15% 20% Source: Canadian Health Care Trend Survey Results, 2010

11 Rates are increasing in all major components of health expenses Average cost per capita of Canadian benefits is $3000 $3500 Extended Health and Dental benefits make up the largest % (67%) of overall cost per capita, at 43% and 24% respectively Prescription drugs, 60 70% of health expenditures, continue to outpace other health cost increases at 15.8% Increase in massage and physiotherapies, and chiropractic treatment driving up medical services costs by 13.5% Source: Canadian Health Care Trend Survey, 2010; AON 2009 Benefits Trend Survey

12 Traditional solutions for addressing the challenge remain effective Transfer cost to employees through: Increasing co payments and deductibles Reducing benefits Restricting eligibility Find alternatives through: Frequent remarketing Preferred Provider Networks

13 New innovative solutions are proving to be effective and becoming increasingly popular Focus on employee preference Employee consumerism / empowerment Wellness programs

14 A view of the solutions across three categories 1. Plan Design 2. Plan Management 3. Technology

15 Plan Design: Focus resources on employee preference by building choice (e.g. Flex, DC healthcare plans) Closely aligns benefits with business objectives and overall rewards Better manages rising costs Addresses generational and cultural needs Changes employer role from guarantor to facilitator Tax effective delivery Types of health plans offered by employer vs. what plan members would most prefer Don't Know Traditional Plan Health Spending Accounts Prefer Have with Employer Flexible Plan Design 0% 20% 40% 60% 80% Source: Sanofi-Aventis Healthcare Survey, 2008

16 Plan Design: Ideal benefits platform should marry facilitating various lifestyle services with cost effectiveness Employee Involvement Assigned Plans Optional Benefits Cafeteria Style Modular Flex Core + Options Cost Management CAP Individual Defined Benefit Defined Contribution Hybrid Type of Plan

17 Plan Design: Advantages to each of the three major groupings Defined Benefit Minimum limitations to coverage access Types of coverage predefined by employer No additional reimbursement after maximums have been satisfied Program costs vary annually based on utilization and claims submitted Security of defined coverage Highly competitive in marketplace Defined Contribution Employer sets maximum dollar value available for Benefit coverage Contribution and annual level of increase pre defined by employer Option can be included to allocate a specific dollar amount to a plan member account annually (Health Spending Account) Increased choice and flexibility tax effective way to pay expenses Competitive in marketplace Hybrid Provides for minimum DB coverage while providing for member choice Security of defined coverage, e.g. Basic Life, AD&D Can include flexibility of HSA component for expenses not otherwise covered under the plan Increased flexibility taxeffective way to pay expenses not covered under plan Highly competitive in marketplace Source: Sanofi-Aventis Healthcare Survey, 2010

18 Plan Design: There s an opportunity for savings with choosing a hybrid approach ($000's) $1,200 $1,000 $800 $600 $400 $200 Accumulated Savings > $900K $ DB Plan DB DC Hybrid Plan Source: Accountability, BenefitsCanada, April, 2011, Comprehensive Benefit Solutions Ltd

19 Plan Design: Health Spending Account 2 nd highest usage rate after the prescription drug card 80% Availability and Usage of Specific Benefits 60% 40% Total available Usage Rate 20% 0% Pay-direct drug card EAP In-house vaccination Health Education Health Screening Personalized Health Counselling Health Spending Account Private clinic check-up Health risk assessment In-house Doctor / Nurse Physician referral service Source: Sanofi-Aventis Healthcare Survey, 2010

20 Plan Design: Moving to holistic approach with Wellness programs can help reduce claims Past focus on diagnosis and treatment New focus on prevention One of few benefits that can help reduce claims without increasing costs 80% 60% 40% Do you have access to a wellness program through your employer? Yes No Don't Know 20% 0% Source: Sanofi-Aventis Healthcare Survey, 2009

21 Plan Design: Making the health connection PRE-CLAIM Employee Wellness, and Illness Prevention POST-CLAIM Health, Dental, Absence Management Desired Population Risk Impact No/Low Risk Moderate Risk High Risk Acute Conditions V. High Risk Catastrophic Illness Do employers understand why they provide benefits and/or what they wish to achieve by providing it? Impact of growing complexity in healthcare and demographic changes Limiting factor in connectivity remain associated with integrating key fact-based insights, wellness programs linked to plan design metrics and employee value proposition Employers of all sizes require/demand more thoughtful guidance in health management options Source: Equitable Life, 2011

22 Plan Design: Wellness progressive best practices 1. Data Intimacy and Connectivity Claims benchmarking at the national, provincial and industry level Customized claims analysis at the plan sponsor, and plan member, 80/20 to determine cost driving drugs and disease ( who and what ) Employee health assessments and wellness program preferences Integration of the above employer and employee views to determine potential list of impactbased actionable and practical insights 2. Employer Profiling Determine priority density associated with cost management versus their desired employee value proposition 3. Solution Bundling and Attachment Apply employer profiling to determine modest versus aggressive plan design solutions risk tolerance Apply integrated claims and humanistic analytics to attach only those wellness programs that is aligned to employer profile and employee preferences Gradual escalation of tools associated with health awareness versus disease management Strike a balance of benefit changes versus wellness programs CONNECTIVITY «PRE AND POST CLAIM WORLD INSIGHTS» CONNECTIVITY «BANDWITH» CONNECTIVITY SOFTWARE AND HARDWARE Source: Equitable Life, 2011

23 Plan Design: Good design satisfies the needs of both the Employee and Employer Employee Priorities Choice / depth Work-Life Balance Health & Well-being Total Rewards Identify and Quantify Mutually Valuable Opportunities Employer Priorities Cost management Employee Engagement Plan Competitiveness Plan Compliance

24 Plan Management: Changing carriers is not the only way to keep your costs in line Is your benefits plan a cost or an investment? If cost, want to pay less If investment, want a return What s your objective? To reduce costs or reduce the rate of increase What are your cost drivers? Focused cost control Source: Benefits cost management: myth or reality?, BenefitsCanada.com, 2011

25 Plan Management: Strategies other companies are taking Offer incentives Health risk appraisals Increase plan deductibles Lifestyle management programs Reduction of reimbursement levels Tiered reimbursement level Increase in drug deductible Move to flex plan Add Critical Illness Increased Ee contribution through payroll deduction Health Care Spending Account Move to Ee paid LTD Mandatory generic substitution Fixed employer contribution Increased Ee contribution through plan design Prescription drugs Promote exercise Search for more competitive insurer 0.0% 10.0 % 20.0 % 30.0 % 40.0 % 50.0 % 60.0 % 70.0 % 80.0 % 90.0 % 2007 and earlier or later Sources: Towers Perrin, Benefits in Crisis, Pulse Survey Report, May 2009; AON Consulting study 2010

26 Plan Management: A little bit goes a long way Co ordination of benefits Plan Sharing 10% - 15% 10% - 15% Dispensing fee cap Generic drug substitution plan 6% 2% - 5% ~ 35% Managed formulary 2% - 5% Other (Prior authorization, preferred providers, audits Sources: Increase in Drug Spending Expected to Continue, BenefitsCanada.com, 2008; Benefits cost management: myth or reality?, BenefitsCanada.com, %

27 Plan Management: But few are taking the opportunity Co ordination of benefits Plan sharing Dispensing fee cap 10% - 15% 10% - 15% 6% Majority reimburse 100% 67% pay 100% 57% medical no deductible 81% dental no deductible $25 deductible 76% do not cap Generic drug substitution plan 2% - 5% Managed formulary 2% - 5% Other (Prior authorization, preferred providers, audits Source: Benefits Cost Management: Myth or Reality, BenefitsCanada.com, February 2011; Mercer Database 3%

28 Plan Management: Majority of employees are still willing to pay higher premiums 60% 50% 40% If the employer couldn t cover the increase to plan costs 30% 20% 10% 0% Pay higher premiums myself Reduce benefits I receive Pay higher portion for those I use Don't know Source: Sanofi-Aventis Healthcare Survey, 2009

29 Plan Management: Whatever you decide to do, communicate and promote to you employees I believe my employer is doing a good job of communicating about my plan I believe my plan is very good / excellent I m more willing to pay higher premiums Source: Sanofi-Aventis Healthcare Survey, 2008

30 Plan Management: Help employees learn the value of their plan and how it works Communicate Total Rewards package Who s paying What can I choose from What can I purchase Where can I get information Success determined by quality of communication Employees learn importance of prevention and cost containment

31 Technology: Understand and leverage technology to enhance the user experience Plan Member Plan Sponsor Provider Promoting Engagement Self-service Promoting Cost Management Technology Sourcing Increasing Competitive Advantage Administration Health Assessment Tools Administration Data Tracking E-Claims Claims Control Claims Cost Management

32 Technology: Integration claims and administration will greatly facilitate cost management Client Benefits Provider Claims Plan Administration / Claims Systems Eligibility Data Premium Remittance TPA Doctors Pharmacies Parameds Payroll /HR Practitioner Third Party Administrator System Payroll and Eligibility Data Payroll Provider Mobile Apps Payroll and Eligibility Data Payroll Administration System

33 Is the future so bright that we gotta wear shades? Health plan costs to increase at double digit rates for the next 5 to 10 years Aging population will contribute to cost increases as medical service and supply usage increases with age Source: Canadian Health Care Trend Survey Results 2008

34 Start now to set a course for sustainability Offer a valued, modernized, competitive group benefits program to aid in attraction and retention Ensure program is relevant to, and of interest to, employees Collect and benchmark data Communicate value Ensure the long term financial viability through careful selection of program design Ensure the program is understood by employees, meets their needs and promotes consumerism Effectively manage the program and tweak where necessary Employees need to perceive their employer cares

35 Remember: Good design satisfies the needs of both the Employee and Employer Employee Priorities Choice / depth Work-Life Balance Health & Well-being Total Rewards Identify and Quantify Mutually Valuable Opportunities Employer Priorities Cost management Employee Engagement Plan Competitiveness Plan Compliance

36 Thank you For a copy of this presentation, please go to: