Greater Cincinnati Association of Health Underwriters

April 21, 2015

Private Exchange

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AGENDA

• Definition of Private Exchange• Impact of Private Exchange and the players• Consumerism: More from B2B to B2C • It’s all about the technology• Case studies• Questions & answers

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WHY YOU SHOULD CARE ABOUT PRIVATE HEALTH CARE EXCHANGES

• Fundamental shift in how insurance products are distributed (GruppoMarcucci)

• Estimated $5b business by 2015; nearly $12b by 2020 (William Blair Equity Research Report)

• Enrollment in private exchanges will likely match public exchanges by 2017 – 30m lives (Accenture)

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EMPLOYER-SPONSORED INSURANCE TRENDS

Current: Traditional Model

Future: Exchange Model

Employer (wholesale) Individual (consumer)

Employer Hands-On Employers Hands-Off

Limited Choices Expanded Choices

Custom Benefit Design Standard Offerings

Defined Benefit Defined Contribution

Offline Online Purchasing

Retirement & Healthcare Silos

Total Rewards

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COMPONENTS & CONSIDERATIONS

EMPLOYER CONTRIBUTION:Defined Contribution/Defined Benefit

• How much?• For whom?• For what?• Funding vehicles – HRA, Section 125• Long term strategy• Communication strategy

CONSUMER SHOPPING EXPERIENCE: • Driven by number of choices• Decision support• Recommendation engines• Live support

TECHNOLOGY/ADMIN SUPPORT: • Eligibility and enrollment platform• Spending account administration• Payroll deduction calculations• Billing payment services • Other

PRODUCTS & CARRIERS – “THE STORE”• Single v. Multi-Carrier - Does multi-carrier make sense?• Local/Regional/National - Networks are still key• Individual v. Fully Insured v. Self Funded - Driven by market & employee segments• Product Shelf - Standard v. custom – probably driven by market segment; Which

products and how many?

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PRIVATE VS. PUBLIC

Group Private Exchange

Public Exchange(ACA/ “Obamacare”

Organizer/Sponsor Private Entity (broker, independent exchange, carrier)

State and Federal Governments

Target Population Employees w/ health benefits through employer

Subsidy eligible without employer coverage

Plan Design Exchange sponsor State or Federal Governments

Plan Selection Employees in the sponsored group

Individuals

Benefits Scope Typical employer plan Essential health benefits

Cost Sharing/Deductibles

Standardized Standardized in 4 levels:Platinum/Gold/Silver/Bronze

Subsidy Employer contribution – can be defined or traditional subsidy

Federal subsidy only for those w/ income below 400% of FPL

Mandate Employer Individual

Premium Tax Treatment

Pre-tax dollars Medical expense – itemized deduction (>7.5% of income)

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THE BIG PICTURE

• Changing roles & responsibilities

• Technology enabling industry

• Consumerism

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THE PLAYERS

• Employer Groups• Brokers / Consultants• Employees / Consumers• Technology Companies• Carriers• Health Care Providers

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THE PLAYERS

• Employer Groups• Tire kicking• Interest high• Action – activity low• Defined contribution interesting, but not ready to pull

the trigger

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THE PLAYERS

• Employees/Consumers• Consumerism• Impact of defined contribution• Decision-support technology• Right-sizing benefit selection

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THE PLAYERS

• Brokers/Consultants• Prospecting is good• Comfortable presenting technology• Presenting advantages of Private Exchange

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THE PLAYERS

• Technology Companies• Benefits administration vs. Exchange• New tech firms daily• Custom vs. packaged

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THE PLAYERS

• Carriers• Launching their own exchanges• Infrastructure challenge• Single vs. multi-carrier offering• Voluntary benefits

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THE PLAYERS

• Health Care Providers• High dollar deductible plans• Receivables & delay of care issues• High Performance Networks

(AKA Limited Networks, Skinny Networks)• ACO – Accountable Care Organization

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BENEFIT TECHNOLOGY/EXCHANGE SPACE

Communication/ Decision Support Enrollment Administration/

ExchangePlan Optimization

Tools

Copyright 2014 – GruppoMarcucci (used with permission)

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EXCHANGE TECHNOLOGY SPACE

Individual Post-65

Individual Pre-65

Micro Group Small Group Mid

GroupLarge Group

Copyright 2014 – GruppoMarcucci (used with permission)

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LINES ARE BLURRING...EVERYONE IS WORKING FEVERISHLY

• Benefit Admin platforms…to develop exchange capabilities• Defined Contribution support• Decision support tools• Pre-negotiated ancillary/voluntary deals• More efficient set-up around exchange constructs

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LINES ARE BLURRING...EVERYONE IS WORKING FEVERISHLY

• Exchange platforms…to develop benefit admin capabilities—moving target• Receive census data regularly• Communicate payroll deductions• Multi-level security • Life events• Dual year processing• Other…

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LINES ARE BLURRING...EVERYONE IS WORKING FEVERISHLY

• Both…to add consumer support tools• Wellness• Cost and quality transparency• Aggregated view of all things related to healthcare• Claims• Health care account balances

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COMPETITORS/LANDSCAPE

Individual Post-65

Individual Pre-65

Micro Group Small Group Mid

GroupLarge Group

Copyright 2014 – GruppoMarcucci (used with permission)

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CASE STUDY #1

• Industry: Hospitality / Restaurant Operations• Region: National / More than 100 locations in

major cities• Population: 2,800 full time, 3,000 part time hourly employees• Prior Plan Costs: $16,670,000 for medical insurance annually

before employee contributions

• Strategy: Benefits necessary to recruit and retain long-term quality talent

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CASE STUDY #1

• Pre-Exchange Benefits Program:• One “Platinum” quality ACA compliant medical and dental option,

which was offered with employer premium subsidies to all employees down to 15 hours per week;

• One non-compliant mini-medical plan with a limited maximum benefit which was offered with employer premium subsidies to all employees down to 15 hours per week.

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CASE STUDY #1

• Challenges Faced:• Become fully ACA compliant, including all necessary IRS reporting

requirements• Provide ACA compliant medical plans and replace the discontinued

mini-medical option• Realign eligibility and offerings by full-time and part-time

populations around ACA guidelines• Track all variable hour and new-hire employees for eligibility and

enrollment in either full-time or part-time benefit classes as appropriate

• Provide bilingual web-based and telephone enrollment support across all of their locations using the Assurex Global® Private Exchange technology platform, while supporting full data interchange integration with a legacy payroll time-and-attendance system

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CASE STUDY #1

• Solution Implemented:• Designed four ACA compliant and affordable medical options,

keeping the current “Platinum” plan and providing three other custom buy-down options

• Developed and provided voluntary bridge medical and dental options for pre-tax purchase down to 15-hours per week, not blocking employees access to premium subsidies available on the state or Federal exchanges

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CASE STUDY #1

• Results from the Assurex Global Private Group Insurance Exchange Implementation:• For their ACA full-time population:

• Of 2,300 full-time enrolled employees, 72% bought down to lower cost options:• 28% chose the current “Platinum” PPO plan• 21% chose a “Gold” PPO plan• 33% chose a “Silver” PPO plan• 18% chose a “Bronze” HDHP PPO plan

• Based on their first six month post-deployment results, this employer is saving an average of $334,000 per month, or 24% of prior health plan costs before employee contributions

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CASE STUDY #2

• Industry: Manufacturing• Region: 4 states• Population: 1500 employees• Three 80/20 plans:

• Self-insured: 2 PPO plans, 1 HDHP

• 10% contribution credit for health risk assessments, biometric screening; non-smoking discount (65% wellness participation)

• Paper and online enrollment• Standard ancillary plans: Life, STD, LTD; no dental or vision

• 500/1000 $3,000/$6,000 (70% enrollment)

• 750/1500 $4,000/$8,000 (23% enrollment)

• 2500/5000 $5,000/$10,000 (7% enrollment)

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CASE STUDY #2

• After exchange implementation• Total of 8 medical plans offered; only 4 shown to participants, based on

decision support tool analysis• 42% chose a higher deductible than previously• Base plus buy-up plan for Life, STD, LTD and Dental

• Additional voluntary offering for vision, critical illness, and ID theft• Enrollment counselors assisted onsite and via call center• No paper allowed!• Positive employee feedback

• More options and a better understanding of benefits• 6-8% first-year savings to employer, based on contribution and

enrollment shift• Wellness will be upgraded in 2016

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• So, why a Private Exchange?• Improved benefit administration• Expanded choices for employees• ACA compliance• Predictable employer cost

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• Questions?

• ContactJohn ClarkSVP, Benefits Practice LeaderAssurex Globaljclark@assurexglobal.com(614) 734-6063