Myth-Busting the Private Exchange Market Top 10 Myths Brought to you by: and Matthew Levin Ann Mond Johnson
Myth 10: Private exchanges are identical in their value proposition. and Proprietary & Confidential 2
Myth 10: Private exchanges are identical in their value proposition Proprietary & Confidential 3
Myth 10: Private exchanges are identical in their value proposition Creates a competitive market for health insurance by facilitating alignment between an employer, its employees, and the insurance carriers to create more efficiency and effectiveness in health care. Key Differentiators From Other Exchange Solutions: Fully Insured Transfers risk to the carrier. No pricing or selection risk for employer Costs are guaranteed not projected or estimated Payment reform strategies are better executed in fully-insured contracts Best in market pricing is built in Competition Real competition among multiple carriers drives cost Proven down and quality up Leader Standardized Plan Designs Allows employees to easily shop and compare plans Reduces the employer s administrative burden Flexibility Long Term Cost Control Select the wellness program that is right for you Ancillary and voluntary benefits not required Experience Three years of experience delivering an active exchange solution with real result Exceptional Employee Experience Low Risk Proprietary & Confidential 4
Myth 9: Private exchanges only work with defined contributions and full-time employees. and Proprietary & Confidential 5
Myth 9: Private exchanges only work with defined contributions and full-time employees Employer Model Employer (wholesale) Employer Hands-on Limited choices Custom benefit design Defined benefit Offline Retirement and health care silos Work Commitment Model Individual (consumer) Company hands-off Expanded choices Standard offerings Defined contribution Online purchasing Total rewards Source:Gruppo Marcucci Proprietary & Confidential 6
Myth 9: Private exchanges only work with defined contributions and full-time employees Fully Insured Self-Insured Single Carrier Risk transfer but cost increase Traditional model Multi-Carrier Leveraged competition, best-in market efficiencies, employee choice, risk transfer but less control over plan design Employee choice, best-in-market efficiencies but less leverage over carriers Group Plan Wellness Consumerism Aon Exchange Solutions give you coverage options and paths for your entire workforce and retirees Proprietary & Confidential 7
Myth 8: Private exchanges provide value to only jumbo employers. and Proprietary & Confidential 8
Myth 8: Private exchanges provide value to only jumbo employers Consumer Decisionmaking Foundation Recommendation Engine Enrollment Benefits Administration TOTAL WORKFORCE Full-time Employees Part-time Employees 1099 Contractors Individuals on COBRA Pre- and Post-65 Retirees Individual Benefits Group Benefits RANGE OF BENEFIT PRODUCTS Medical, Ancillary, Voluntary and Rx Benefits Employee Wellness Programs Subsidy-Eligible Public Plans Off-Exchange Plans INNOVATIVE BENEFIT STRATEGIES Defined Benefit, Defined Contribution and Financial Modeling Self Funding, Partial Self Funding and Fully Insured Compliance, Reporting and Engagement Plan Design, Networks and Actuarial Analysis Proprietary & Confidential 9
Myth 8: Private exchanges provide value to only jumbo employers More than 1.2 million employees, retirees and their eligible dependents from more than 100 companies to choose individual and employer-sponsored health benefits through Aon's suite of private health exchanges Employers People Carriers Active employees 33 >850,000 >30 Retirees >50 Consumerism ~350,000 >90 Aon Exchange Solutions clients include companies with ~2,500 to ~260,000 employees Proprietary & Confidential 10
Myth 7: Cost benefits from private exchanges are only associated with employee buy down. and Proprietary & Confidential 11
Myth 7: Cost benefits from private exchanges are only associated with employee buy down Proprietary & Confidential 12
Myth 7: Cost benefits from private exchanges are only associated with employee buy down Cost Drivers Risk charges Profit charges Premium taxes ACA fees Mandated benefits Commissions Cost Reducers Competition Risk adjustment Best-in-market contracting Pricing approach Standardized designs Reduced administration/consulting costs Aggregate First-Year Savings Average Renewal Increase 2013-1.2% 2014-1.6% +5.1% 2015-1.1% +5.3% Proprietary & Confidential 13
Myth 6: The CFO has no interest in private exchanges. and Proprietary & Confidential 14
Myth 6: The CFO has no interest in private exchanges Source: TD Bank Proprietary & Confidential 15
Myth 6: The CFO has no interest in private exchanges Since 2006 Today (Projection) Employer 51% increase $8,677 average spent per employee Employee 91% increase of out-of-pocket and payroll contributions $4,969 average spent per year Total Cost 63% increase $13,646 per employee annually Source: Aon Hewitt HHVI With employee pay typically rising at 3% per year, compare a 19% pay increase to a 63% health care cost increase Experts estimate that health care costs will continue to rise at 6-8% per year Proprietary & Confidential 16
Myth 5: Employees dislike shopping on private exchanges. and Proprietary & Confidential 17
Myth 5: Employees dislike shopping on private exchanges Amazon Shopping, 76 American Express 45 Humana 32 NET PROMOTER SCORES Kaiser Permanente 40 USAA Banking 83 Vanguard 65 Proprietary & Confidential 18
Myth 5: Employees dislike shopping on private exchanges Enrollees who agreed with the following statements: I like being able to choose my own carrier 88% I am satisfied with the benefits enrollment experience 80% I feel like (employer) tries very hard to make my benefits enrollment experience positive I was satisfied with the coverage and plans available to me I appreciate the changes my employer made to our benefits selections this year 75% 66% 60% Results based on 2014 post annual enrollment survey with 32,234 responses. Proprietary & Confidential 19
Myth 4: Consumers don t know how to make healthcare decisions. and Proprietary & Confidential 20
Myth 4: Consumers don t know how to make healthcare decisions Proprietary & Confidential 21
Myth 4: Consumers don t know how to make healthcare decisions Plan Distribution was Broad & Price Mattered Participants Leveraged Tools in Meaningful Ways 75% of enrollees felt confident they chose the health plan that offered the best value for them and their families Reason for Coverage Level Choice % Price 34% Coverage similar to current plan 20% Best level of medical benefits for them 18% Reason for Carrier Choice % Lowest cost for selected level 35% Network 23% Good past experience with carrier 11% 15 min VS. 3min Time spent with service representative during annual enrollment in the exchange vs. traditional enrollment. Proprietary & Confidential 22
Myth 3: Private exchanges have nothing to do with employee engagement. and Proprietary & Confidential 23
Myth 3: Private exchanges have nothing to do with employee engagement Proprietary & Confidential 24
Myth 3: Private exchanges have nothing to do with employee engagement Research indicates that employee benefits programs and incentives strongly influence employee engagement. Recent studies of nearly 500,000 employees across various industries identified key drivers for leveraging benefits programs to improve employee engagement. Some of these drivers included: Maximizing incentives Design and promote creative, cost-effective incentives through repeated communications Leveraging digital Use a robust, multi-media digital strategy Reaching the families Drive spouse engagement to address potential gender gaps Aon Exchange Solutions provide resources and tools that help drive engagement with employee populations including: Full communications program Website, videos, mobile/tablet accessibility Enhanced enrollment tools Health plan comparison, provider search, rating tools Full member advocacy Problem resolution, navigation and clinical support programs for employees and their families Source(s): Castlight Health Proprietary & Confidential 25
Myth 2: Only health insurance will be offered on private exchanges. and Proprietary & Confidential 26
Myth 2: Only health insurance will be offered on private exchanges Proprietary & Confidential 27
Myth 2: Only health insurance will be offered on private exchanges Healthcare Coverage Products that Protect Products that Ease the Pain Medical Dental Vision Critical Illness Accident Hospital Indemnity Basic Coverage - Life - AD&D - LTD Voluntary Coverage - Supplemental Life - Dependent Life - Supplemental AD&D - Dependent AD&D - Supplemental LTD Products that Discount Auto/Home Pet Insurance Identity Theft Legal *Aon will start offering products beyond Health in 2015. These products are currently offered to our clients through our Benefits Administration and Consulting services Proprietary & Confidential 28
Myth 1: Private exchanges are a fad and are going away. and Proprietary & Confidential 29
Myth 1: Private exchanges are a fad and are going away Proprietary & Confidential 30
Myth 1: Private exchanges are a fad and are going away Enrollment (M) 40 Public exchange 30 Private exchange 27 30 30 31 20 19 15 10 9 9 1 0 2014 2015 2016 2017 2018 Source: Boston Consulting Group Proprietary & Confidential 31
Private Exchange Checklist When deployed, does it leverage your team? What is the range of products? What tools help evaluate the options? Does the private exchange provide a total workforce solution? Does the private exchange offer a level of transparency on costs and tradeoffs? Can the private exchange serve as a gateway to consumer engagement beyond open enrollment? and Proprietary & Confidential 32
Considerations for Your Roadmap to Successful Private Exchanges How about Medicare and pre-retirees? What is the business problem you are trying to solve? What is your talent/human capital strategy? And what is the market for recruitment? What levers do you have and which have you already played? and Proprietary & Confidential 33
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