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 % of 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 outcomes

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

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Your role for all benefits starts to look more like how you manage your 401k

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Multi-product Exchange provides best opportunity for employer 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 Welfare 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

on 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

of 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

21 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 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

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 options 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