utside

issue no. 10 december 2014

W is the williamson group’s client newsletter,providing insights and information on

industry trends and developments

dear bill: a letter to a great leader & friendpreparing for the introduction of CRM 2

let’s make opt-out the new opt-in: the case for auto-enrolmentwhat lies beneath: an introduction to drug plan analytics

plus

Wnewsletter

think

the box

boehmer box implem

ents plan consumerism

Although it seems counterintuitive—providing more with less—there is a way!

The inability of traditional benefit plans to produce sustainable healthcare cost containment has brought about a horizon of change. The transformation that we are witnessing today is based on the belief that costs are not solely provider-driven, but rather consumer-driven.

We are at the beginning of this transition with early adopters leading the way, but for many, the jury is still out. This makes it all the more important for employers to understand the elements of a consumer-driven plan as well as any barriers to success.

What do we mean when we speak of a consumer-driven plan?

To illustrate, let’s take a look at an example outside of the healthcare realm first.

Consider the example of a sales organization where employees are provided with corporate vehicles from the employer in order to meet with their prospective clients. The employees would also be allowed to drive the vehicle for personal use. Through this program, the organization experiences an average annual mileage of 15,000 kilometres with the highest utilization being at 20,000. In consideration of these expenses, management decides to provide the following coverage:

• Provide employees with a gas card to cover 20,000 kilometres in travel/year;

• allow employees to expense one oil change every 5,000 kilometres—up to 20,000 kilometres;

• and allow employees to expense all general repairs.

By planning their corporate coverage to manage the costs for the highest utilization, the organization is essentially writing a blank cheque and condoning unlimited utilization of a program that was simply intended to get employees from point A to B as efficiently as possible. While this type of laissez-faire approach to corporate expense is generally not the norm, in today’s Employee Benefits Programs, many employers are still not assessing the efficiency of their plan design or its ability to eliminate waste.

Recently, The Williamson Group (TWG) partnered with Boehmer Box to explore this problem and unpack a solution.

the client—boehmer box

Based in Kitchener, Ontario, Boehmer Box is a state-of-the-art manufacturer that specializes in offset printing of paperboard packaging for a wide range of leading food, beverage and consumer packaged goods.

It is a company that prides itself on innovation and product performance. They consistently seek to use the most effective materials and production methods to reduce the overall amount of packaging required without compromising on the overall brand goal or product position. Boehmer Box is a dominant competitor in their business segment due to their proactive approach and private label expertise.

01

Founded in 1874, Boehmer Box currently employs roughly 300 people—with quality at the heart of everything they do. think outside-the-box:

boehmer box implements plan consumerismthe challengeManaging employee group benefits is becoming more challenging for organizations. From increased costs and government regulations, to the swing in demographics, the complexity continues to grow and organizations are required to provide more with less. As health care costs continue to soar faster than the overall rate of inflation, organizations are searching for ways to reduce and control costs without a negative impact to the employee workforce. But how does an organization achieve this?

A state-of-the-art facility—with quality at the heart of everything they do.

the champion

02

Today, with The Williamson Group supporting change, Katie Morrison—Director of Human Resources at Boehmer Box—takes the aforementioned external business approach and embodies it in her strategic approach to Group Benefits.

Working with The Williamson Group, Morrison was able to take a detailed approach to Boehmer Box’s benefit analysis and identify where they were, not necessarily going wrong, but creating inefficiencies and/or symptomatically hindering consumeristic behaviour amongst the employees.

Morrison knew that the organization had been holding on to a traditional group benefits plan for far too long. They had too many options—6 different benefit schemes—and the administration was taxing for everyone involved. However, more so than that, the multitude of benefit schemes still were not impacting employee behaviour when it came to making their actual benefit choices and claims. It was time to drive change in the organization.

By going through a custom industry benchmarking and in-depth plan and utilization analysis, The Williamson Group (TWG) was able to propose an innovative benefit plan design and partnership—providing competitive employee benefit options, reducing overall costs, and improving the service and administration.

“If you can give us better benefits, for less money—while providing us with better service and taking some of that burden off of us, why wouldn’t we do it? Why wouldn’t we take advantage of that opportunity? I believed in The Williamson Group, and we believed in plan consumerism,” said Morrison in response to the opportunity.

Katie Morrison, Director of Human Resources

on-site photography by Katie Michiels, The Williamson Group

03

the solution & results

Today Boehmer Box features a simplified, consumer driven approach within their benefit plan structure. TWG reduced the number of employee benefit segments down to the same two options (Plan A and Plan B) for salaried and hourly employees in order to simplify the administration and incent the change that Morrison wanted to see in the employee behaviour. While both options maintain a standard level of coverage for Out-of-Country/Province, Dental, Life, Accidental Death & Dismemberment (AD&D), Critical Illness, and Short- and Long-Term Disability, the plans diverge when it comes to the Extended Health Care coverage.

Plan A includes a benefit offering that removes all paramedical1 and vision coverage and replaces it with a Health Care Spending Account (HCSA). This option allows employees to assess their benefit spending year over year and determine how, and where, they would like to invest their HSCA dollars—creating a unique consumer-driven approach.

Conversely, employees who feel uncomfortable with a reliance on an HCSA, may select the robust Plan B that includes 100 per cent coverage2 for Health, Dental, Vision and the most popular Paramedical coverage but that comes with an employee-employer cost-share on Premiums. This small change—cost-sharing—once again would prove as a catalyst for the employees to engage with their benefits and understand the value of their options.

“Working with TWG was really positive. I knew we had a great benefits plan before—our employee engagement scores spoke to that—but now it’s even better. It was great to actually have employees come up and say thank you for making a change!”

Katie Morrison, Director of Human Resources, Boehmer Box

04

thinking outside-the-box

So how do employers ensure that they minimize non-essential spending within their employee benefits program? It begins by understanding what types of behaviours your current plan design is driving and how you can change behaviour to become more efficient, ultimately minimizing cost and keeping the same coverage in place. Here are some questions to consider when assessing how well your plan is providing incentive for employees to be good consumers of healthcare.

• Does my plan incent employees to use the lowest cost treatment option?

• Are employees aware of the costs of their healthcare?• Do employees contribute to the costs of their healthcare?• Are employees rewarded for being good consumers? • Does the plan make employees aware of wasteful spending?

For each organization these questions will bring about different answers based on their unique demographics, and utilization. Strategies that effectively infuse aspects of consumerism into their program must align with the unique aspects of the group. Spending the time to understand the behaviour that your plan promotes, and, formulating a strategy that can shape employee behaviour are key to creating better consumers, eliminating waste, and developing a more stable and sustainable benefit program.

Morrison herself proved to be a catalyst for positive change at Boehmer Box. She went into the project with TWG with a strong stance that changes needed to better for everybody involved, and communicated well. She was the project champion, acted as an employee advocate to ensure that the plan design changes would meet their needs, and assisted in the communication rollout.

“Pay statements, mandatory meetings—the more the better. I wanted to make sure that we focused on the positive changes and highlighted the HCSA as the option where employees could spend what they want, how they want,” explained Morrison.

Many organizations struggle when rolling-out plan design changes, but Boehmer Box came out ahead.

1 Hearing aids remain covered under both options.2 Annual maximums apply.

Curious how your benefit plan measures up within your industry? Contact your TWG Consultant, or a member of our Business Development Team for a complimentary benefit benchmarking assessment.

colleen baker, senior director Business Development & Global Benefits

Local: 519-756-9560 x260Toll Free: 800-265-9973Email: cbaker@williamsongroup.com

partner with the williamson group for an outside-the-box solution

The focus and attention placed on the communication and positioning of the changes eased the transition for employees.

The strong partnership between TWG and Boehmer Box produced a plan design that was outside the box in thinking and implementation. TWG enabled Boehmer Box to shift some of their standard costs to the spouses’ plans through an effective coordination program, and with HCSA utilization at approximately twenty per cent, the organization is positioned to reinvest funds back into their other employee programs.

05 06

It was March of 1986 when we first met you. Would it sound strange if we were to say that 1986 feels like yesterday? We certainly remember it like it was, despite the over 10,000 days that have passed.

We had just lost our only Employee Benefit Consultant but instead of getting down on ourselves, we called up the Manager of Great West Life’s Hamilton office and asked, “Who is the best group insurance person in Canada?” He replied, “Well, that’s Bill Brown in our Toronto office, but you’ll never get him.” Challenge accepted. Within a week, you had resigned and sold your house in Toronto—bound for our greener pastures in Brantford—and never looking back.

Bill, it still feels like yesterday.

We can’t begin to explain the impact that you’ve had on us here at The Williamson Group (TWG), or within our industry. In fact, and don’t let this go to your head old friend, it’s quite possible that in your 30 years in this business, that no one else has ever been as involved in more new business sales. You’ve got them all beat, yet you were so unassuming in doing so.

Yes, you were our industry’s most unassuming and creative thought leader. We swear, you could make heads spin with how fast you were able to understand a client’s needs—of course always following it up with some creative problem solving that would involve TWG providing a custom solution. When you would present to a client (shall we just call them all clients because let’s face it, eventually you’d win them over?), you weren’t afraid to put all of the cards on the table, present all the facts, never shying away even if it meant revealing a weakness. But that was part of your charm, showing a little weakness in such an honest way, that by the time you came to the solution, you had become such a trusted advisor that everyone wanted to bend over backwards to work with you. You brought us in-depth knowledge of the newest programs, you envisioned futures, and sealed deals with a word and a handshake. That is trust. I mean, you never met a challenge you wouldn’t face, or couldn’t solve and I think that’s what we liked about you; we’re kindred spirits that way.

You just fit here at The Williamson Group. You were a wildcard with the fierce determination to always exceed our expectations—to outdo your own expectations, and transcend client expectations. But more so than that, what we remember most, is how much you cared.

You were a great leader here with us, Bill. You taught us so much that we will carry forward in business, and in our relationships with clients, colleagues, and family.

You taught us to offer kindness and respect. You always treated everyone as equals. You never made people feel silly for asking questions and always sought to ensure they understood an answer. You knew that everyone takes pride in their job, no matter what level, and thus you would take time to acknowledge their efforts all the same.

You taught us to offer encouragement and gratitude for another’s work. When one of your team was running out of energy or feeling down, you would always take notice and remind them of all the strengths and skills that they bring to the table. And, when cheerleading wasn’t enough, you weren’t afraid to roll up your sleeves and jump into the problem-solving with them. At the end of the day, you would somehow still remember to be grateful for the efforts that others made on your behalf, or on the behalf of TWG. Your energy was unending.

Of course, you have taught us to offer laughter. And your laugh, Bill, was infectious. Somehow you always knew how to relieve the tension with a good joke. Sure, laughter could not replace persistence and hard work, but you certainly knew how to use it to put things in perspective. Not to mention the fact, that it has simply kept our workplace fun.

And lastly, Bill, you have taught us to offer hope. There have been times—one recent time in particular—when things have felt harsh and bleak. But your great leadership paved us a path forward. You helped build this team and your values have been instilled in each and every one of us. You repeatedly let it be known that you believe in us. Yes, your expectations were high, but we are still game to meet and exceed them. You were seminal in our success, and your inspiration—who you are, what you’ve done—will continue to lead us into our next chapter.

Bill, you are reflected in our employees, in our actions, and in our culture here at The Williamson Group. You always put your family first, and we were proud to come a close second.

I guess all we’re trying to say with this letter is that it has been a tremendous ride. We couldn’t have done it without you—and we don’t want to—but you’d probably tell us to get moving. So instead, just know that you continue to inspire our future.

We miss you, Bill. You will forever be, never gone and always remembered.

Sincerely,

The Williamson Group

dear bill

rest in paradise1957—2014

07 0608

preparing for the introduction of CRM 2

what is CRM 2?Beginning on July 15, 2013, the Canadian Securities Administrators (the “CSA”) put in place new amendments to the NI 31-103 (National Instrument 31-103 Registration Requirements, Exemptions, and Ongoing Registrant Obligations that will continue to roll out over the next three years until 2016. These amendments are the second phase of the regulators’ plan to bring a new “client relationship model” (CRM) into effect, which is now referred to as CRM 2. These changes in cost and performance disclosure will affect financial advisors, businesses, and individuals who deal with mutual funds. This includes scholarship plan dealers, exempt market dealers, and fund managers at such places as banks, credit unions, investment counsel, and any other registrant that sells directly to the public.

why is CRM 2 happening?Overall, CRM 2 will increase the transparency of account performance as well as account fees and charges. In an attempt to boost investor’s confidence and enroll significant regulatory change, CRM 2 will be providing investors with clearer information about the costs and performance of their investments. Previous implementation of CRM 2 in countries such as the Netherlands, UK, and Australia has demonstrated that investors have been able to properly assess their progress towards their investing goals with CRM 2’s greater-fee transparency.

what are the key dates?The amendments to NI 31-103 are being phased in over the next three years starting July 15, 2013.

In July, 2014, firms had to begin providing pre-trade disclosure of charges, explain performance benchmarks, and disclose their compensation from debt transactions in trade confirmations.

The next upcoming dates will be:

july 2015 – Advisors will provide new client statements including quarterly account statements, position cost information, and market value under set methodology.

july 2016 – Firms will begin annual reports on charges, investment performance, and other compensation while increasing the cost of disclosure in trade confirmations. They will also be disclosing investment fund managers to dealers and advisors.

what are the next steps for advisors?Advisors should prepare for these changes by demonstrating and documenting the value of their advice to clients as well as preparing to discuss the changes with their clients prior to their implementation. Advisors with a stronger value proposition will be those who deliver services in addition to investments, such as insurance or financial planning. Client relationships and innovative communication will also be crucial for advisors throughout these changes.

what are the next steps for clients?Clients can prepare for CRM 2 by ensuring they are up to date on their financial literacy as the transparency of account performance, charges, and fees will not only strengthen the client-advisor relationship but also allow for the client to judge the value of the advice they receive by how much they are paying for it.

coming soon

sue bellDirector, Investment Services at The Williamson GroupInvestment Funds Advisor at Worldsource Financial Management Inc.

519-756-9560, ext. 207 sbell@williamsongroup.com

are you seeking financial planning advice? speak with a financial advisor at the williamson group:

The information provided is general in nature and is provided with the understanding that it may not be relied upon as, nor considered to be, the rendering of tax, legal, accounting, or professional advice. Readers should consult their own subject matter experts for advice on the specific circumstances before taking any action. The opinions expressed are those of the owners and writers only. Commissions, trailing commissions, management fees, and expenses may all be associated with mutual fund investments. Mutual funds are not guaranteed, their values frequently change and past performance may not be repeated. Please read your funds simplified prospectus before investing. Mutual Funds and Segregated Funds provided by the Fund Companies are offered through Worldsource Financial Management Inc. Other Products and Services are offered through The Williamson Group

1009

let’s make opt-out the new opt-inthe case for auto-enrolment in the workplace

Brett joined The Williamson Group as a Consultant within Pension Services in 2013. He is reseponsible for building lasting, professional relationships with our clients and suppliers while partnering with both to ensure viable pension solutions are identified and delivered effectively to clients. WIth his strong relationship management skills and a results-driven approach, clients benefit greatly from Brett’s focused and thoughtful approach to Pension Consulting.

bhill@williamsongroup.com 1-800-265-9973 ext 301

brett hillconsultant, pension services

the williamson group

Did you know that 45% of Canadian employees choose to not participate in their workplace retirement savings plan? As a result of this, capital accumulation plan (CAP) sponsors are continuously on the lookout for more intriguing ways to get employees to opt-in to their retirement plan. So now CAP sponsors and employers are asking, “Why not make them opt-out instead?”

drawing focus towards auto-enrolmentRetirement Savings Plans with auto-enrolment provisions allow plan sponsors to automatically enroll their employees into the Plan as soon as they become eligible. Following their enrolment, employees would have the option to opt-out of the plan although they would have to actively do so themselves.

Overall, auto-enrolment is seemingly ideal for both the employer and employee. Employees start contributing to their retirement plans as soon as they are eligible allowing for members to benefit from their savings being invested over longer periods of time. The plan forces employees out of their opt-in inertia—removing the instant-gratification mindset—and into thinking about the bigger picture of their future. Plans with auto-enrolment provisions may cause an increase to the employer’s budget; however, from an attraction and retention perspective, auto-enrolment illustrates a grander gesture on the employer’s part to assist with the financial well-being of the employee in their retirement planning.

default fund investmentOf course, the benefits auto-enrolment and auto-escalation will be significantly diluted without an appropriate investment strategy. Gone are the days where a Money Market fund or even a traditional Balance fund would be deemed an appropriate default fund (i.e where assets are invested in the absence of an active member investment election). As a default investment, Target Date Funds (TDFs) offer a sophisticated yet simple, low maintenance investment choice that automatically becomes more conservative as a member approaches their target retirement date. If chosen as the default fund investment in a workplace retirement plan, TDFs make long-term investing easier for employees as they simply choose a single investment fund designed to help them reach their retirement goals.

but one size may not fit allFor many CAP sponsors, it is important to understand that ‘one size does not fit all’ and to allow flexibility under a retirement savings program. By allowing employees to opt-out of plan participation rather than opt-in through auto-enrolment, employers are eliminating possible stagnation while properly preparing employees for their future retirement.

While legislation does not currently support auto-enrolment and auto-escalation in Canada, one can see that with the Voluntary Retirement Savings Plan (VRSP) coming into effect in Quebec as early as July 1, 2014 and other provinces working towards Pooled Registered Pension Plans (PRPPs) legislation, it’s only a matter of time.

the automatic escalation of contributionsWhile an immediate 100% return on investment may seem like incentive enough for plan members to maximize company matching contributions, however encouraging members to contribute at a level that will provide for adequate retirement income remains to be an uphill battle. When creating a workplace retirement savings plan, including a provision such as auto-escalation provides for incremental increases in either or both the employer and member required contribution rates. For example: a 1% increase for each year of membership in the first 5 years, and a fixed rate thereafter. Outside of Canadian borders, auto escalation has been growing in popularity as a way to significantly improve retirement income adequacy, particularly when coupled with auto-enrolment.

Example of auto-escalation: A workplace retirement plan can have a 1% increase for each year of membership in the first 5 years, and a fixed rate thereafter.

“The link between employee health and productivity is well documented. Almost 1 in 3 workplace absences can now be attributed to stress. This is not at all surprising with Canadian household debt to income ratio reaching a record high of over 164% in 2013. We expect to see employee financial well-being at the forefront of wellness and productivity improvement programs in the not too distant future.”

- Brett Hill

11 12

what lies beneath:an introduction to drug plan analytics

Earlier this year, The Williamson Group (TWG) began an in-depth analysis of a corporate client’s prescription drug benefit plan. This project formed a jumping-off point for the client as they began their journey towards the development of a meaningful health and wellness strategy—ensuring that as they progress, resources could be targeted to the areas where they may have the most impact.

This project was undertaken with a long-standing client—Client A—that TWG has been partnered with for over eighteen years. The analysis examined every individual drug claim paid for each plan member within the client experience from 2011 to 2013. This was then used to identify areas where the plan had been performing well, to isolate areas of immediate focus, and to establish some baseline metrics to allow for future plan performance comparisons.

client profile

Between 2008 and 2014, Client A:• Doubled in size—from 441 lives to 834 lives• Increased slightly in average age—from 42 to 43 • Had a static gender ratio—74% male, 26% female

When chronic conditions and disease states were taken into consideration for Client A, it became evident that Diabetes was the third most costly general therapeutic area in 2013, and Depression consistently ranked as one of their top three disease states based on amount paid per claim and number of claimants.

By bringing these key findings to light, TWG was able to identify several risk factors—Specialty Drug Therapies, Age-Related Chronic Conditions (Diabetes), and Mental Health (Depression) —where meaningful health and wellness initiatives could improve health outcomes, thus positively impacting their overall drug spend.

continued on next page >>

speciality drug utilization

2011 2013

employee vs. spouse /dependent claim ratio 76% vs. 24% 57% vs. 43%

In addition, Specialty Drug Therapies were identified as the primary cost driver within the plan, accounting for nearly sixty-six per cent (66.1%) of the year-over-year increase in overall plan cost, with spending more than doubling from 2011 to 2012. In 2013, seventy-four per cent (74%) of specialty spending resulted from chronic disease claims that are expected to recur annually for the client. This plan in particular had been sheltered from significant cost increases as a result of their stop-loss provision. Coordination of benefits managed to shelter the plan from fifteen per cent (15%) of the Specialty Drug spend.

disease state ranking

• Top three Disease States result in nearly 1/3 of total annual plan spending (27.7%)• Cancer Treatment jumped over 30 spots in two years (from 32nd to 2nd) with an increase of

830% from 2012 to 2013•MS treatment consistently ranks in top three Disease States, with Depression (ranking not

pictured) consistently in top five.

average drug claim cost:• specialty drug: $1,470• non-specialty drug: $50

When we looked at the claimant profile for Client A, we found that nearly sixty per cent (57.8%) of claims were made by those between the ages of 25 and 54, with another thirty-three (33%) per cent of claims being accounted for by those in the under 24 age group. However, what really stood out for our client was that sixty-one per cent (61%) of the claim total was attributed to spouses and dependents .

Rank Disease State % of Annual Plan Spending

2011 2012 2013 2011 2012 2013

5 1 1 Rheumatoid Arthritis 6.2% 16.2% 12.6%

32 18 2 Cancer Treatment 0.5% 1.2% 7.7%

1 2 3 Multiple Sclerosis (MS) 10.3% 8.9% 7.4%

stay tuned

Stay tuned for our March issue of W, where we will take a closer look at the impact that Age Related Chronic Conditions, particularly Diabetes, can have on a client’s drug plan performance, and what you can do to combat these effects.

13 14

It’s important to note that while these results were taken from a single client, they are applicable and representative of many organizations when compared to the national benchmarks. As such, all organizations could benefit from a better understanding of these risk factors, and a discussion with their TWG Consultant regarding plan performance and the potential impact of employee health and wellness programs.

For more information regarding this project, view the resources & media area of our new website for a copy of the material presented by Sandra Scott, Senior Director, Group Life & Health, at our annual Client Conference—Think! (tagged “think2014”).

age-related chronic conditions (diabetes)disproportionate spending for diabetic vs. non-diabetic employees

diabetic

2011

non-diabetic

2012 2013

diabetic non-diabetic diabetic non-diabetic

4.2x higher spending 3.6x higher spending 2.5x higher spending

$2,591

$620

65.3% 70.3%

$2,513

$696

$1,961

$795

all other conditions diabetes

80.5%

mental health (depression)disproportionate per capita spending for depressed vs. non-depressed employees

2011

non-depressed

2012 2013

3.3x higher spending 2.3x higher spending 2.0x higher spending

$542

27.1%

$1,494

$650

$1,529

$755

all other conditions depression

26.5%

depressed non-depresseddepressed non-depresseddepressed

26.3%

$1,776

Find out more about our singular approach to the provision of health and wealth solutions:

225 King George RoadBrantford, ON N3R 7N7

Tel Local: 519-756-9560Toll Free: 1-800-265-9973

info@williamsongroup.com

williamsongroup.com

feedbackW was created to provide our clients with meaningful information and insights into industry trends and developments. To help us deliver the information you need, we’d appreciate your comments and suggestions. Please provide us with your feedback by completing a three minute survey you will find here: www.surveymonkey.com/s/W-TWG-NewsletterThank You!

legal informationW is provided for general information purposes only. The Williamson Group and its affiliates make no representations or warranties as to its accuracy or completeness. Readers should be aware that the content of this publication should not be regarded as legal, tax, accounting, investment, financial, or other professional advice nor is it intended for such use.

W