Using Data to Improve Health Plan Performance A Case Study Webcast With Grant Thornton Jim Meagher, Manager, National Compensation and Benefits Grant Thornton Eric Parmenter, Senior Consultant Towers Perrin December 11, 2008
Presenters: James E. Meagher Jim currently serves as Manager, National Compensation and Benefits for Grant Thornton LLP in the firm s Chicago office. Before joining Grant Thornton, Jim served as Director of Global Compensation and Benefits for Littelfuse, Inc., and earlier, as Director of International Human Resources for Panduit Corp. He earned an M.S. in psychology and business from the University of Idaho and his B.A. in humanities from Purdue University. He holds mergers and acquisition certification from Mercer, and has completed international expatriate administration training. Jim served on the board of the Human Resources Management Association of Chicago with their international interest group from 2000 to 2007. In addition, he held membership in the Society of Human Resources Managers from 1995 to 2007. 2
Presenters: Eric Parmenter Eric Parmenter, CLU, ChFC, RHU, REBC, SPHR, CEBS is a senior consultant with Towers Perrin in the firm s health and welfare consulting practice. He has 22 years of experience helping employers develop innovative total reward strategies that align with their business objectives. Eric is a recognized national leader in the area of health care benefit design and delivery. Prior to joining Towers Perrin, Eric was Midwest practice leader for compensation and benefit consulting at Grant Thornton LLP. He also owned his own benefit consulting, outsourcing and administration firm. Eric has a B.A. in psychology from the University of Illinois and nearing completion of an M.B.A. from the University of Chicago s Booth School of Business. 3
Today s discussion Overview: How and when to use benchmarking Grant Thornton s strategy and results Key lessons learned Questions and answers 4
Profile: Grant Thornton Grant Thornton LLP is the U.S. member firm of Grant Thornton International Ltd (GTI) one of the six global accounting, tax and business advisory organizations With a presence in more than 100 countries, the member firms of GTI leverage the global reach of the network to provide personalized attention and the highest quality service to clients worldwide Founded in 1924, Grant Thornton LLP serves both public and private clients in 52 offices in the United States 5
Who works for Grant Thornton? Two Distinct Groups at Grant Thornton: Employees and Partners Significant growth in head count over past four years 72% of Grant Thornton Employees are under 40 years old 6
Overview Grant Thornton undertook a comprehensive benefits review in 2005 Grant Thornton implemented a reward strategy on 1/1/2006 based on benchmarking findings around competitive market positioning Goal: Create greater alignment between reward programs and business strategy Issues addressed: Industry growth and consolidation Grant Thornton s rapid expansion and globalization Pressure to improve talent attraction, retention, performance and engagement Limited resources Grant Thornton has continued to use benchmarking to enhance strategy and measure results 2005 2006 2007 2008 2009 Benefits Review Competitive Benchmarking Benefit Changes ABHP Culture of Health HC-260 Benchmarking Vendor Management ABHP Culture of Health HC-360 Benchmarking ABHP Culture of Health HC-360 Benchmarking Greater Population Health Measurement Culture of Health 7
Comprehensive benefits benchmarking: 2005 Perception: Grant Thornton s benefit programs were not market competitive Grant Thornton utilized a variety of benchmarking sources to study its competitive position in the market Published surveys Towers Perrin Employee Benefit Information Center Towers Perrin BenVal Towers Perrin Health Care 360 Benchmarking Findings Lower benefit values for health, STD, LTD and retirement Higher employee contributions for health Flex, dental, life, vision and paid time off at market Voluntary benefits below market Overall benefit costs competitive but recent trend increases were unsustainable Grant Thornton used the results of the studies to develop a unique positioning statement in the competitive accounting industry 8
Why did we undertake a benefits review? The Grant Thornton Experience for Our People The Work: Challenging and interesting The Pay: Competitive in the marketplace The Learning: Am I getting what I need? The Environment: Provide respect and flexibility The Reputation: Proud to be a part of GT Benefits to Support The Grant Thornton Experience for Our People Health Care Coverage Financial Programs Insurance Options Health and Well-Being Programs Voluntary Benefits 9
Aligning our benefit strategy with The Grant Thornton Experience for our people Goals Manage the current and future cost of health and welfare benefits Strategies Encourage employee accountability Place significant emphasis on employee wellness build a culture of health Prevent new illness, better manage existing illness Promote ease of administration Attract and retain employees at all levels Provide a competitive and affordable benefit offering that will distinguish GT from competitors Demonstrate the firm s interest in and commitment to healthy workforce Increase employee awareness of Total Rewards offering Help employees build financial security Highlight the value of the health care programs from a cost perspective and a focus on the individual 10
Building a culture of health at Grant Thornton: Goals Differentiate Grant Thornton from competitors Improve attraction, retention and engagement by demonstrating that the firm cares about the well-being of all associates Promote sustained behavior change to aggressively manage benefit cost trend Determinants of Health 50% 10% 20% 20% Access to Care Genetics Environment Behavior 11
Our culture of health initiative focused on several key elements Consumerism Movement toward high-deductible health plans with HSA contributions Care Management Comprehensive care management/disease management initiative Employee Health Management Tools 24/7 nurse line Online medical decision support tool Pedometer distribution Online health risk assessment linked to disease management and EAP Employee Engagement Healthy lifestyle communication campaign 12
New focus on financial performance and consumer behaviors Funded Through a 70/30 Subsidy and HSA Deposits Network-only plan (EPO) Choice of two PPO plans and HSA funding Healthy lifestyles financial incentives for employees Smoking cessation Disease management participation Safety seatbelts, helmets Executive physicals for Partners 13
Communication strategy to focus on health and wellness Created new, ongoing dialogue with employees and partners Built consistent communication framework and identity Involved senior leadership Committed to measure results through ongoing benchmarking using the Towers Perrin Health Care 360 Benchmarking Study Multi-channel communication campaign Employee benefit meetings Evening call-in sessions for employees and families GT TV messages from executive leadership Intranet and e-mail campaign Living Healthy newsletter We ve only just begun the dialogue with employees! 14
Summary of 2005 activities Grant Thornton made changes to its benefit program based on benchmarking results Change Medical Program Wellness Programs Disability Program Voluntary Benefits Replaced the PPO $300 with an HDHP and an employer-funded HSA Replaced the PPO $1,000 with an HDHP and an employer-funded HSA Mandatory utilization of prescription drugs Provide employees with a $50 incentive for participating in health-related activities Implemented a Healthy Lifestyle Program including the following: Healthy lifestyle pledge 10,000 steps program Online health risk assessment (HRA) Self-care books Increase short-term disability (STD) benefits from 70% to 100% for employees Added a suite of voluntary benefits, including: Group Variable Universal Life insurance Auto and home Insurance (remarketed) Critical illness insurance Pet insurance Financial planning tools 15
Summary of 2006 activities Grant Thornton made no changes to the 2007 medical, dental and vision plan designs due to substantial changes made in 2006 Contribution Change Medical Target contribution for EPO increased from 30% to 31% Target contribution for HDHP options decreased from 30% to 25% Introduced four-tier structure Dental Structure changed to become more equitable Estimated savings to Grant Thornton for the changes was approximately $120,000 16
Summary of 2007 activities Grant Thornton focused on non-medical benefits in 2007 for 1/1/2008: Program Dental LTD Life Insurance Change Conducted a procurement process for a new administrator for 1/1/2008 Conducted a procurement process for a new administrator for 1/1/2008 Conducted a procurement process for a new administrator for 1/1/2008 Savings realized through all three procurement processes resulted in savings of just over $1,000,000, over three years 17
Summary of rate increases Medical plan rate increases over the past four years 14% 12% 10% 8% 6% 4% 2% 0% 2006 2007 2008 2009 Grant Thornton Towers Perrin HCCS* Design changes and plan management have kept Grant Thornton medical plan increases below market benchmarks for the last three years *Source: 2009 Towers Perrin Health Care Cost Survey (HCCS). 18
Medical cost benchmarks: 2007 Overall Program Efficiency Overall program efficiency measures the performance of your total program against the overall database average. Results are a function of both the efficiency of and enrollment in each plan Database Actual Adjustment Factors Custom Benchmark Grant Thornton Actual $8,579-1% 4% $6,289 $6,407-17% -15% -27% Age/ Gender Family Size Geography Plan Value Composite Key Message Your total program is only slightly (2%) less efficient than the database. This translates into an estimated higher cost of $530,600. 19
Medical cost benchmarks: 2008 Overall Program Efficiency Overall program efficiency measures the performance of Grant Thornton s total program against the overall database average. Overall efficiency results are a function of both the efficiency of each plan offered and the enrollment in each plan. Database Actual Adjustment Factors Custom Benchmark Grant Thornton $8,829 5% $6,796 $6,617-1% -16% -12% -23% Age/ Gender Family Size Geography Plan Value Composite Key Message Grant Thornton s total program is 3% more efficient than the database. This translates into a current savings of $900,000. 20
Guiding goals and objectives: Updated Provide a competitive, affordable, flexible benefit offering Manage benefits cost and trend to levels lower than national averages Promote a culture of health Streamline benefits administration Adjust to evolving partnership needs Allow for future retirement benefit changes Attract and retain talent Promote awareness of the value of total rewards Highlight partner benefits as best in class Support employee and Partner retirement planning and saving for retiree medical 21
Element 2008 plan designs The following chart highlights the medical plan design elements for the current 2008 offerings EPO PPO $1,100 PPO $2,650 In-Network In-Network Out-of-Network In Network Out-of-Network HSA Funding N/A $250/$500 $750/$1,500 Deductible None $1,100/$2,200 $2,200/$4,400 $2,650/$5,150 $5,300/$10,300 Out-of-Pocket Max None $2,000/$4,000 $4,000/$8,000 $2,650/$5,150 $5,300/$10,300 Coinsurance 100% 75% 55% 100% 100% RX Retail Generic: $10 Formulary: 30% ($10/$100) Nonformulary: 50% ($10/$100) RX Mail Generic: $20 Formulary: 30% ($20/$200) Nonformulary: 50% ($20/$200) After deductible: Generic: $10 Formulary: 30% ($10/$100) Nonformulary: 50% ($10/$100) After deductible: Generic: $20 Formulary: 30% ($20/$200) Nonformulary: 50% ($20/$200) After deductible: 100% covered After deductible: 100% covered Inpatient Copay $100 None None None None ER Copay $50 None None None None OV Copay $20 None None None None 22
Open enrollment results: 2006 through 2008 HSA 25% HSA 20% 15% 10% 5% 0% 2006 2007 2008 Enrollment in Grant Thornton s two HSA-based plans has increased steadily from 15% in 2006 to 19% in 2008. Through effective employee communication, this shift away from the EPO can be expected to continue 23
Key lessons learned: Management by fact 1. Understand your business environment, challenges and opportunities 2. Set your workforce management priorities on that basis 3. Develop and document your philosophy, guiding principles, goals and strategy for rewards overall, and health benefits in particular 4. Evaluate your current position against the above, using metrics that capture program performance in key areas Financial performance Population health Employee engagement 5. Adjust strategy and tactics to address shortfalls 6. Execute consistently and aggressively 7. Measure results 8. REPEAT! 24
Questions and Answers Jim Meagher jim.meagher@gt.com Eric Parmenter eric.parmenter@towersperrin.com 25