A Private Exchange Solution February 21, 2013 Participants Joe - - PowerPoint PPT Presentation

Changing the Paradigm in Employee Benefits

A “Private Exchange” Solution

February 21, 2013

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• Joe DiBella, Executive Vice President, Managing Director

Conner Strong & Buckelew

• Tom Whitty, Sales Executive

Liazon

Participants

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

Agenda

Current Landscape in Benefits

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Past | Present | Future

1992 2012 The Future Annual cost to provide coverage for a family $4,000 $21,000 + At current trend rates, annual costs will double in 10 years Average employer share of premium 76% 78% - 80% Remain steady? Health spending as %

• f GDP

11% 17% 20% by 2017 Number of Americans with a chronic condition 118 million in 1992 141 million in 2012 164 million in 2025

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• 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

Employers’ Concerns

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Employers’ Top Challenges in Maintaining Affordable Benefit Coverage

Note: Companies were asked to identify their top three challenge. Source: 17th Annual National Business Group on Health Survey, 2012.

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Employee v. Employer Health Care Costs Per Worker

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2012 Costs for Family of Four

City MMI National Percentage Miami $24,965 120.4% New York City $24,545 118.4% Chicago $23,551 113.6% Boston $22,419 108.2% Philadelphia $22,054 106.4% Memphis $21,427 103.4% Minneapolis $21,020 101.4% Washington DC $21,009 101.4% Los Angeles $20,908 100.9% Nationwide $20,728 100.0% Denver $20,683 99.8% Dallas $20,435 98.6% Seattle $19,734 95.2% Atlanta $19,506 94.1% Phoenix $18,365 88.6%

Source: 2012 Milliman Medical Index

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• 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

• utcomes
• 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

New & Emerging Strategies

Changing the Paradigm: Private Exchange Platform

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• 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

Bright Choices

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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

Liazon Company Overview

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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 14

Your role for all benefits starts to look m ore like how you m anage your 40 1k

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Multi-product Exchange provides best

• pportunity for em ployer to transition

to a Defined Contribution Model Single Carrier

• Multi-plan options (6-10 plans)
• Meaningful array of choice on price and

benefits Single Carrier by line of coverage

• Multi coverage options
• Meaningful array of choice and benefits

Health Plans Other Health and W elfare Benefits ( ancillary lines)

The Bright Choices Store

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“Doctors – I don’t go much. I want to spend as little as possible

• n 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 “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.”

Tom

Cost $650

Alicia

Cost $650

Everyone gets a POS plan, basic dental and company-paid life.

Employees have different needs A “one-size-fits-all” solution doesn’t meet them

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Bright Choices makes it easy for employees to translate those needs into a “Personalized” benefits portfolio

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Employees fill out a simple

• questionnaire. They get additional

educational information and guidance. They receive a personalized recommendation. They pick their portfolio

• f plans from a

range of choices.

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Finding the right protection is about combining the right portfolio of plans for that person or family

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Chris & Family

Previously $1,800

With Bright Choices cost is $1,300 Tom Previously $650 With Bright Choices cost is $550 Alicia Previously $650 With Bright Choices cost is $675

(includes her monthly metrocard)

Everyone got what they wanted and total savings are $575

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Case study NJ Professional Services Firm

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Before Bright Choices

POS $$$$

With Bright Choices

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

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Without Bright Choices Total $404k With Bright Choices Total $281k $299k

Premium cost for 23 employees in a POS Plan

$62k

Dental, Life, LTD

$342k

Annual Renewal had they done the same old

$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

Case Study NJ Professional Services Firm

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Lessons Learned 70,000 Transactions in 5 Years

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In Year 2, 65% keep things the same, 25% evolve, 10% make radical changes

~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.

Why it Works

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• Today employees are

disconnected from the real cost

• f 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

Human Behavior Old School

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• 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

Human Behavior New School

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• 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

For the Employer

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• 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

For the Employee

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• 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

• ptions and only buy what

they need

• Employers are likely “over

buying now”

• Transparency and value
• The model will result in

lesser costs over time

Will it Cost Less?

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• 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

Plan Administration

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• 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

On-Line Enrollment Engine

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• 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

Administrative Costs

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• 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

Consultative Services

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• Consideration of the defined contribution approach
• Economic modeling and planning
• Analysis and options

Next Steps