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

Participants  Joe DiBella, Executive Vice President, Managing Director Conner Strong & Buckelew  Tom Whitty, Sales Executive Liazon 2

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

Current Landscape in Benefits

Past | Present | Future 1992 2012 The Future At current trend Annual cost to provide rates, annual $4,000 $21,000 + coverage for a family costs will double in 10 years Average employer 76% 78% - 80% Remain steady? share of premium Health spending as % 11% 17% 20% by 2017 of GDP Number of Americans 118 million 141 million in 164 million in with a chronic in 1992 2012 2025 condition 5

Employers’ Concerns  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 6

Employers’ Top Challenges in Maintaining Affordable Benefit Coverage Note: Companies were asked to identify their top three challenge. Source : 17 th Annual National Business Group on Health Survey, 7 2012.

Employee v. Employer Health Care Costs Per Worker 8

2012 Costs for Family of Four National City MMI 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 9

New & Emerging Strategies   Adoption of contemporary On site primary care services health and wellness strategies  Pharmacy cost containment based on outcomes approaches  Migration to consumer directed,  Expanded contribution account based plans arrangements by family size  Custom provider networks  Claim and Dependent Audits based on provider quality and  Use of technology to educate outcomes and inspire  Transparency tools around cost  Defined contribution  Value based benefit designs approach through a private exchange in place of defined benefit programs 10

Changing the Paradigm: Private Exchange Platform

Bright Choices  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 12

Liazon Company Overview 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 13 13

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 Your role for all benefits starts to look m ore like how you m anage your 40 1k 14 14

The Bright Choices Store Multi-product Exchange provides best opportunity for em ployer to transition to a Defined Contribution Model Health Plans Single Carrier • Multi-plan options (6-10 plans) • Meaningful array of choice on price and benefits Other Health and W elfare Benefits ( ancillary lines) Single Carrier by line of coverage • Multi coverage options • Meaningful array of choice and benefits 15 15

Employees have different needs A “one-size-fits-all” solution doesn’t meet them Everyone gets a POS plan, basic dental and company-paid life. “My favorite doctor “My son has asthma, “Doctors – I don’t go much. doesn’t accept insurance. so we see the doctor often. I want to spend as little as possible I’d like to stop smoking, I don’t want to think about how on premiums. I haven’t built up much and I do worry about cancer much I spend each time. I need in savings, so if I get sick and I’m as it runs in my family.” to protect my family in case not getting paid, I need a something happens to me.” source of income.” Chris & Family Tom Alicia Cost $650 Cost $1,800 Cost $650 16 16

Bright Choices makes it easy for employees to translate those needs into a “Personalized” benefits portfolio They pick their portfolio Employees of plans from a fill out a range of choices. simple questionnaire. They get additional They receive a educational personalized information and recommendation. guidance. 17 17

Finding the right protection is about combining the right portfolio of plans for that person or family Alicia Previously $650 Chris & Family Tom With Bright Choices Previously $1,800 Previously $650 cost is $675 With Bright Choices With Bright Choices (includes her monthly metrocard) cost is $1,300 cost is $550 Everyone got what they wanted and total savings are $575 18 18

Case study NJ Professional Services Firm Before With Bright Choices Bright Choices POS POS HMO 1 HMO 2 POS HSA HMO HSA HMO HSA $$$$ $$$$ $$$ $$ $$ $$ $ LONG DENTAL LIFE VISION ACCIDENT TELEMEDICINE PET DENTAL LIFE LONG SHORT CRITICAL WELLNESS TERM 3 OPTIONS 10 TERM TERM ILLNESS 3 OPTIONS DISABILITY OPTIONS DISABILITY DISABILITY 3 OPTIONS 6 OPTIONS 19 19

Case Study NJ Professional Services Firm Without Bright With Bright Choices Choices Total $404k Total $281k $342k $299k Annual Renewal had they done Premium cost for the same old 23 employees in $209k a POS Plan Cost for 23 employees in plan of their choice $72k Dental, Life, LTD plus Vision, Accident, CI, $62k STD, Wellness, Dental, Life, LTD Telemedicine and Pet $24k assumed spent from HSA - Employer avoided a $43k rate increase - Employees saved $55k in payroll deductions $185k in premium costs (+ gain $24k in their HSAs) 20 20

Lessons Learned 70,000 Transactions in 5 Years ~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. In Year 2, 65% keep things the same, 25% evolve, 10% make radical changes 21 21

Why it Works

Human Behavior Old School  Today employees are disconnected from the real cost of 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 23

Human Behavior New School  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 24

For the Employer  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 25

For the Employee  Employee still has a section  They enroll on-line via the 125 qualified, pre-tax benefit private exchange 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 26

Will it Cost Less?  Defined contribution plans - Workers migrate to less saved most retirement plans costly plans like consumer directed  The defined contribution options and only buy what model for benefits is intended they need to change the paradigm in the cost and value proposition for - Employers are likely “over employers and employees buying now” - Employers will set the - Transparency and value amount they want to pay - The model will result in for benefits in a defined lesser costs over time way - Employees will spend and buy differently when it’s their money 27