The Road to Exchange Solutions - Delivering Sustainable Value for All Your Employee Populations

The Road to Exchange Solutions - Delivering Sustainable Value for All Your Employee Populations

Janet Vermeulen, Senior Consultant, Towers WatsonRebecca Duff-Campbell, Communication & Change

Management Consultant, Towers Watson

towerswatson.com © 2014 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only.

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Health Care Benefits Continue to be Highly Valued

98% U.S. employers committed to offering health care programs to full-time employees in 2015 or after**

95% U.S employers that say subsidized health care is an important part of their value proposition for full-time employees†

57% U.S. employers that say private health exchanges could be a viable option in 2015 or after**

Health care benefits are an important driver — in the top 10 —of employee attraction, globally and in the U.S.*

* Towers Watson, 2012 Global Workforce Study.** Towers Watson, 2013 Health Care Changes Ahead Survey.† 2014 Towers Watson/National Business Group on Health Employer Survey on the Value of Purchasing Health Care.


Excise Tax Impact:Must Stay Between the “Floor and Ceiling” of Costs to Avoid the Levy

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40% Excise Tax Cap Ceiling ($10,200/$27,500)

Minimum plan of 60% actuarial value and affordable to employees

Lower the gross costs of the plan (i.e., average claims and administrative expenses per employee), and the rate at which those costs increase Reduce benefit plan value (increase employee costs through higher

deductibles, coinsurance or copays) Lower trend through use of wellness programs, disease

management programs, incentives and penalties Consider reductions in dependent subsidies Consider “pay” strategy and direct employees to Exchanges

Introduce new wellness programs, giving employees tools and resources to maintain and improve their health. This minimizes the long-term health care trend Healthier employees mean fewer and smaller (medical &

prescription drug) claims, leading to lower budget rates Lower budget rates extend the period of time before an employer

hits the excise tax thresholds

2014

2018

Plan design high enough to avoid penalties

Plan value low enough to avoid the excise tax

Manage cost trend Improve workforce

health Reduce risk factors Optimize vendor

performance Manage high-cost

claim risk Minimize core-

benefits


Health Care Delivery New Opportunities

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Components that drive lower cost/high value

Affordability and Excise

Tax Risk Total Rewards EVP Financial commitments

PPACA Competitive needs Delivery alternatives

External Influences Employer Objectives

BenefitDelivery Channel

Optimization

Benefit Restructuring

Network Optimization

and Contracting

Population Health and Health Care

Accountability and Engagement

Health Care Reform is leading to significant changes in the health care system as well as potentially how benefits are delivered

towerswatson.com © 2014 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. J\GH\00025\14\Marketing\OESA HR Council Exchanges\OESA HR Council Private Exchange Overview April 24 2014.pptx

1. BuildManage performance on own: likely through added employee OOP costs, investing in aggressive care/condition management and health improvement

Employer Managed

Three Paths to Delivering Health Care Benefits

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2. BuyPrivate exchange path: sustainable high-performing product leveraging best-practice solutions

Exchange Managed

3. ExitExit with subsidy or pure exit: pay $2,000 penalty (less first 30) — deal with loss of family subsidy

Employee Managed

Excise tax avoidance and trend

management


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The Changing Plan Sponsor Mindset: Self-Managed vs. Exchange-Based

Strategic Decision Points

BuildEmployer Managed

PrivateBuy

Exchange Managed

PublicExit

Employee ManagedControl of plan design

Employer has complete ability to customize

Employer initiated design changes likely to be needed on a regular basis

Exchange operator designs plans for optimal value

Plan updates are responsibility of exchange owner

Oversight agency dictates standard designs

Inconsistent application of design levers across states

Vendor management

Employer is responsible for selection and management of health plan and carve-out vendors

Exchange operator selects, contracts and manages vendor network

Oversight agency selects, and may negotiate rates with, insurers


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The Changing Plan Sponsor Mindset: Self-Managed vs. Exchange-Based (continued)



PrivateBuy

Exchange Managed

PublicExit

Employee ManagedFinancing approach

Employer likely to self insure, retaining risk of one-year cost fluctuations

Contribution strategy can be equal dollar, equal percentage or other approach

Employer may choose to self insure or fully insure

Contribution structure is equal dollar — and can shift all risk to participants

All plans fully insured

Limited risk mitigation for insurers from TRF pool and elsewhere

Participant experience

Employer directed Likely limited variation

by geographic location

Exchange directed Geographic rate

differentiation

Exchange influenced

Geographic rate and design differentiation


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The Changing Plan Sponsor Mindset: Self-Managed vs. Exchange-Based (continued)



PrivateBuy

Exchange Managed

PublicExit

Employee ManagedSource of premium funding

Employer and employee dollars used to pay premiums

Employer and employee dollars used to pay premiums

Federal subsidies and enrollee dollars used to pay premiums

Tax efficiency

Employer costs: tax deductible

Employee: tax-free employer subsidies and pre-tax premiums; some out-of-pocket costs may be tax free

Employer costs: tax deductible

Employee: tax-free employer subsidies and pre-tax premiums; some out-of-pocket costs may be tax free

Employer: penalties not deductible

Employee: After-tax premiums and out-of-pocket costs


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What Employers are Moving to Private Exchanges?

Employer Description Attributes Desired End StateFinancially Inefficient/Challenged

High health plan costs Limited health optimization Corporate financial limitations

Lower-cost, more efficient health plans

Savings accrue to employer

Resource constrained

Moderately successful status quo

Lack of leadership, staffing and/or operational commitment

Improved health plan financial performance with outsourced administration

Plan savings pay for outsourcing plus provide some employer relief

Execution “Fatigue”

Highly successful status quo but with extensive resource demand

Other HR/benefits priorities requiring attention

Maintenance of financial efficiency and health focus

Ability to reallocate employer assets while streamlining oversight and management


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How Do You Evaluate Private Exchanges?

Is it viable long term? What is the impact of excise

taxes and how does the exchange plan to avoid

them? What is the expected trend rate in the plans?

Who saves? Are cost reductions the result of cost-shifting, improved risk pools, operational efficiencies?Do employers or participants or both receive thesavings?

What is theexchange’s strategic

direction? Is it focused on health optimization, risk shifting,

consumer experience/buy downs, or other

approaches?

How is the participant experience realized?What decision support tools, modeling tools and call center support options are available to participants? Who owns/provides these services?

“When you’ve seen one

exchange, you’ve seen

one exchange”


Towers Watson’s OneExchange

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OneExchange: Solutions for All Populations


Sustainability: Optimizing Health Care Plan Management

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Health Plan Management

BenefitsAdministration

Key Features of OneExchange Active Provide high-performing designs that

promote consumer behavior, and healthy lifestyle through wellness, care management and engagement

Take advantage of best in class pricing and vendor management (including access to voluntary benefits)

Support team members with guided enrollment and compelling multimedia communications to the new programs

Access to complete benefits administration and full spectrum of ongoing program management support

Communication and Change Management


OneExchange: 2014 Active Exchange Model

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The goal: Deliver a high-value, sustainable framework built on four key pillarsIncentives/disincentives

to leverage improved health behaviors and decisions

Best-in-market care and condition

management protocols

Consumerism tools and point-of-care decision support

Long-term financial viability

Consumer-guided enrollment experience

High-value design elementsWellness, care/Rx management, transparency and more BenefitConnect

enrollment and ongoing administration platform

Self-funded plans in 2014

Four health plan choices

Dental and vision plan choices

Top carriers in 50 states and Puerto Rico Premiums configured across 40 geographic rating areas


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Employee Experience & Perspective


1. BuildIncreased responsibility to be a good health care consumer and adopting wellness programs, and also accountability

Employer Managed

2. BuyUnderstanding of new plans new concepts; increased responsibility in selecting plans; responsibility to be a good health care consumer and adopting wellness programs

Exchange Managed

3. ExitCompletely self-reliant to understand plans, personal and financial impact; responsibility to be a good health care consumer and adopting wellness

Employee Managed

Employee Experience

Level of ChangeIntensity Increases

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OneExchange Active Communication Overview

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What colleagues and their families will need to knowJuly – August August – September October – November December – into next

year Why the company

is taking this path What it means for you

and your family What education and

support you can expect in the weeks and months ahead

Where you can go if you have questions

An overview of health care benefit basics and key terms

An introduction to your health plan choices for upcoming plan year

The financial support the company will provide and a focus on your benefits and costs

What you need to do as you prepare to enroll

How to evaluate your choices and match them up with your needs

Where to go when you’re ready to enroll

What happens after you enroll

What the company will do to support your ongoing health and wellbeing

What support is available from your health plan vendor

How to make the most of your health care benefits during the year

Announce Educate Enroll Support1 2 3 4


Communication Recommendations

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Pre-enrollment Pre-enrollment announcement Pre-enrollment guide Team member meetings or

webinars Education and reminders (video,

e-cards, poster) OneExchange video library Links to OneExchange carrier

microsites

Enrollment OneExchange information library OneExchange video library Videos Guided annual

enrollment/decision support process

Provider search Links to carriers Wellness incentive plan

modelling

Post-enrollment Resource guide OneExchange information and

video library Wellness incentive reminders Ongoing new hire and life event

enrollment Guided enrollment/decision

support process Provider search SPDs

Portal

Customer service support for plan questions

Customer service support for plan and enrollment questions

Customer service support for plan, enrollment and usage questions


Make it simple, easy to understand and intuitive

Engage with multi-media Most effective, even for tech-savvy audiences – they still want someone to tell

them what’s happening and why

Get in front of and behind the message

Say it 10 times

Culture and Change Considerations

Have a thorough and thoughtful change and communications strategy• Grounded in your audiences needs and meets them where they’re most comfortable• What you want them to know, think and do• Defined objectives, success measures

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A New Health Care Landscape for All Employers

All employers need to build a new, high performing structure to keep their health plan viable, sustainable and compliant

The role of the plan participant is changed going forward accountability engagement financial investment

You will need to respond in a manner that fits your objectives, culture and financial constraints

You will need to re-examine your approach every year as the emerging markets mature and offer new alternatives


Towers Watson Contacts

Rebecca Duff-Campbell 248.936.7492 [email protected]

Janet Vermeulen 248.936.7543 [email protected]

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The Road to Exchange Solutions - Delivering Sustainable Value for All Your Employee Populations

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