private exchange swot analysis - society for human...
TRANSCRIPT
3 | 15
© 2015 GALLAGHER BENEFIT SERVICES, INC.
Private Exchange SWOT Analysis Charlie Isaacs
Senior Client Consultant, Practice Leader
ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™ © 2015 GALLAGHER BENEFIT SERVICES, INC.
CURRENT: TRADITIONAL MODEL FUTURE: EXCHANGE MODEL
Employer (wholesale) Individual (consumer)
Employer hands-on Employer hands-off
Limited choices Expanded choices
Custom benefit design Standard offerings
Defined benefit Defined contribution
Offline Online purchasing
Retirement and health care silos Total rewards
Trends
ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™ © 2015 GALLAGHER BENEFIT SERVICES, INC.
Defined Contribution
• Similar to defined contribution for retirement (e.g. 401k)
– Employer establishes budget
– Determines buckets
• Link to total rewards philosophy
– Budgeted growth
– Performance factor
ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™ © 2015 GALLAGHER BENEFIT SERVICES, INC.
Gaining Momentum
23% of employers will be
considering a shift toward
a defined contribution
approach within the
next three years.
Arthur J. Gallagher & Co.
2014 Benefits Strategy and Benchmarking Survey
23%
ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™ © 2015 GALLAGHER BENEFIT SERVICES, INC.
Private Exchange • Sponsored benefits marketplace
– Medical
– Ancillary
– Voluntary
– Other
• Fully or self-insured option
• Shopping experience
– Sponsor selects carrier(s)
– Vendor identified
– Budget determined
– Employees purchase products
ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™ © 2015 GALLAGHER BENEFIT SERVICES, INC.
New Attention
• Employers are looking for a way to cap expenses
• Alternatives to public options
• A diverse workforce can make “one-size-fits-all”
impractical
ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™ © 2015 GALLAGHER BENEFIT SERVICES, INC.
How it Works
PLATFORMS
150+ technology vendors with
solutions including varying
levels of decision-support
features and benefits
administration
functionality
PLANS
Long-term rational pricing
Single carrier vs. multiple
Range of plan options
Selection issues
Fully insured vs
self funded
BROKERS
Packaged solutions involving
various carriers, products and delivery
platforms
CARRIERS
In-house solutions, as well
as partnerships with brokers
and associations
EMPLOYERS
Sponsorship of private exchange solutions
PLAYERS
Instead of the usual “one-size-fits-all”
approach, personalize and right-size each
employee’s benefits portfolio.
• You give employees a set amount of
money to spend on benefits
• Employees shop in the online store and are
guided to personalized benefits selections
ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™
ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™ © 2015 GALLAGHER BENEFIT SERVICES, INC.
Experience
• Typically not pooled, so your demographics and
experience determine your rates
• Defined contribution gives employees ownership in how
they spend
• Employee purchase decisions and revised risk profile can
change experience
ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™ © 2015 GALLAGHER BENEFIT SERVICES, INC.
Not about Shifting Risk
• When done well, employees:
– Better understand and appreciate their benefits
– Choose plans that are suited to their individual needs
– Lower costs
– Manage risk
ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™ © 2015 GALLAGHER BENEFIT SERVICES, INC.
Key Differences
• Exchange vs. benefits administration
• Process vs. transaction
– Strategic alignment
– Regulatory and legislative compliance
– Defined contribution discussion/decision
– Communication
– Meaningful choice
– Robust decision support
– Superior customer advocacy
ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™ © 2015 GALLAGHER BENEFIT SERVICES, INC.
Strategic Planning
90% of organizations surveyed do
not have a written strategic
benefits plan with measurable
objectives.
87%
Gallagher Benefit Services, Inc.
2014 Benefits Strategy and Benchmarking Survey
90%
ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™ © 2015 GALLAGHER BENEFIT SERVICES, INC.
Considerations
• Controlling the growth of benefit costs is important to you
– Defined contribution
– Trend
• Hire date to full productivity is relatively long and you
want to continue to provide benefits as part of your
acquisition/retention strategy
• Employees don’t fully understand/ appreciate what you are
spending on benefits
• Employees want more choices
ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™ © 2015 GALLAGHER BENEFIT SERVICES, INC.
Time of Change
• Align your total rewards philosophy with your overall
organizational strategy
• Leader vs. follower
• Model impact
ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™ © 2015 GALLAGHER BENEFIT SERVICES, INC.
Exchange Considerations
EMPLOYER CONTRIBUTION
Defined Contribution/Defined Benefit - How much?
- For whom?
- For what?
- Funding vehicles-HRA, Section 125
- Long term strategy
- Communication strategy
PRODUCTS & CARRIERS “The Store”
Single v. Multi-Carrier – Does multi-carrier make sense?
Local/regional/national
Individual v. Fully-Insured v. Self Funded – Driven by market segment and employee segment
Product Shelf – Standard v. custom; driven by market segment
– Which products and how many?
CONSUMER SHOPPING EXPERIENCE
Driven by number of choices
Decision support
Recommendation engines
Live support
TECHNOLOGY AND ADMIN SUPPORT
Eligibility and enrollment platform
Spending account administration
Payroll deduction calculations
Billing and payment services
Other
ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™ © 2015 GALLAGHER BENEFIT SERVICES, INC.
Private Exchange Models
Pre-65 Group Sponsored Exchanges
Post-65 Group Sponsored Medicare Exchanges
Pre-65 Consumer Directed
Post-65 Consumer Directed Medicare
Group Coverage
Individual Coverage
Group Coverage
Individual Coverage
WEB BASED ENTITIES 20 public announcements (examples: eHealth, GoHealth)
Public Exchange Models
Small Group SHOP Exchange (Federal to launch in 2015)
Individual State/Federal Exchanges
Private exchanges – market organization Available Options
ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™ © 2015 GALLAGHER BENEFIT SERVICES, INC.
Gallagher Marketplace
Plan Summaries Key components of plans
simply and without
insurance jargon
Recommendation Engine Sophisticated statistical
modeling to predict the right
combination of plans
Education Accessible education
about insurance with
articles, videos and
FAQs
Comparison Tools Side-by-side
comparisons of options
ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™ © 2015 GALLAGHER BENEFIT SERVICES, INC.
Source: Towers Watson
Employee Communications
With effective
benefit
communication
Without effective
benefit
communication
Those with above
average healthcare
benefits
Those with below
average healthcare
benefits
76.2% 83.6%
22.1% 25.7%
Percentage of employees responding favorably to their benefits package:
ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™ © 2015 GALLAGHER BENEFIT SERVICES, INC.
Employee Engagement
• Communications to
educate and engage
employees in the private
exchange
ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™ © 2015 GALLAGHER BENEFIT SERVICES, INC.
Case Study
• Manufacturing company with 1,000+ employees
• Goal:
– Structure benefits to align with growth strategy
– Control cost and mitigate risk
ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™ © 2015 GALLAGHER BENEFIT SERVICES, INC.
Our Approach
• Analysis of current options
– Similar medical plans with little variation
– Significant premium increases
– High basic life benefit
• Examine Total Rewards strategy
ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™ © 2015 GALLAGHER BENEFIT SERVICES, INC.
Results Pre-Exchange vs. Post-Exchange Spend
Pre-Exchange Post-Exchange
Total Spend $9.5 M $9.3 M
FLEX Credit -- $6.5 M
Life $268,540 $167,837
LTD $234,092 $102,048
STD $292,315 --
Employer Contribution $7.2 M (75%) $6.7 M (72%)
Employee Contribution $2.3M (25%) $2.5 M (28%)
Medical Plan Ratio
Total Premium $7.9 M $8 M
Employer Contribution $5.9 M (75%) $6.4 M (81%)
Employee Contribution $1.9 M (25%) $1.5 M (19%)
ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™ © 2015 GALLAGHER BENEFIT SERVICES, INC. ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™ © 2015 GALLAGHER BENEFIT SERVICES, INC.
Questions? Charlie Isaacs
Senior Client Consultant, Practice Leader