Private Exchange Market A Report from the Front Lines MAHP Summer Conference 2014

1. Private Exchange Market A Report from the Front Lines MAHP Summer Conference 2014 Denise Christy

2. Private Exchanges : The Ultimate CDHP

3. Private Exchanges PHIX

4. Private versus Public Exchange

5. Private Exchange Goals Createa competitive market in health care benefits at a retail/consumer level Facilitatethe movement to a defined contribution model for those employers who are aligned with this philosophy Expandchoice, allowing consumer selections (e.g., networks, premiums, deductibles) that could not be driven unilaterally at the employer level. Source: Aon Hewitt.

6. If you’ve seen one Private Exchange … you’ve seen one

7. Different Models of Exchanges

8. Defined Contribution: From Parenting to Partnering

9. Defined Benefits to Defined Contribution Game Changer • Preserving the group benefits offerings and all the tax benefits • Driving a more educated and engaged worker- values the cost of care • Offering choice and financial protection for all levels of talent/roles Shifting from DB to DC

10. Budget the Spend-Transfer the Power Employer Decides Lump or Tiered Classes of Workers Split or Total HSA allocation Unused Dollars Waiver Credit Part Time

11. Drivers to Defined Contribution Hard Drivers • IRS Notice 2013-54 /DOL 2013-03- HRA usage • 2018 “Cadillac Tax” 10,200/ 27,500 • 9.5% Contribution maximum • De-Risking the Balance Sheet ( Walgreens)

12. Employer Adoption of Private Exchanges Unless you’re the Lead Dog…..

13. Employer Market Options in a Post Reform Marketplace Least Change 2015---------------------------2018 Most Change Keep what they have Continue coverage/ adjust offering Offer through a private exchange Hybrid offering Opt out 45-50% 35-45% 3-5% 4-9%

14. Survey Results • Private Exchange Strategy for a Post Reform Market • MACPA Conference, April 29 2014 • Denise Christy

15. 3 million Enrolled though the Public Companies

16. Three Reasons for Employers to Choose a Private Exchange 1. Costs – Employers seeking cost reductions and predictability in their costs. 2. Enhance Employee Satisfaction- Employees have a say in choosing their plans. 3. Relieve administrative headaches and the compliance burden.

17. Reason #1 Costs • Higher uptake of CDHP plans on Exchange • Predictability of costs from a budget management point of view • Impact of new product offerings to enable employee purchasing lower cost options (narrow networks) • Higher consumerism levels to bend trend on utilization

18. Average per employee contribution is $337.16 per month Source: PWC 2014 employer survey

19. Choosing the HDHP options

20. Walgreens Perspective De-Risking Self funding – Walgreens held all the risk. • Disease Management not working due to lack of integration 2. Wellness/ no medical premium ROI Private exchange- Each stakeholder plays their part • Carriers take on the risk and the disease management where it belongs. • Employers contribute at a pace in keeping with market variation and talent retention • Employees choosing and using care and coverage greater insight to the cost. Employer Employee Carrier and Provider

21. Reason #2 Employee Satisfaction Liazon Employee Survey July 2013

22. This is what employee Engagement Looks like!! Liazon, 2013

23. Reason #3 Administrative Burden and Compliance • PPACA requires employers to now track the following: • flex spending account annual limit • Detailed Dependent information • Employee acknowledgement of SBC’s • Employee acknowlegement on Notice of Exchange • Form w-2 Reporting • PCORI Fees • Waiting period limited to 90 days • Wellness Incentives • Full-time/Part time status and hours worked (stability and lookback periods) • 6055 and 6056 Reporting ( 2015 extension) • Auto Enrollment Rule (guidance pending )

24. HRIS and Enrollment Platforms Integrate In the next year most companies will be engaged in evaluating their HR automation process. CedarCrestone HR Systems Survey Private Exchange Technology will automate the enrollment experience, through consumer centric decision support. Most PHIX technology solutions will have full integration capability with payroll and SAS HR vendors to support compliance reporting .

25. What do we expect this year?

26. Small Groups 2014-2015 DB or DC? Determine if a Private Exchange/Defined Contribution is the best Solution Level Fund or FI Hold or Move? 60% of Carriers Small Group block are renewing December 2014

27. Large Group Strategies 2015 Mandate kicks in.. • Employers who have not covered previously are now seeking coverage.. Carriers may apply participation penalty surcharge, but must issue coverage • Agents are now introducing DC as viable strategy • Most Self Funded employers will stay the course, moving to mostly CDHP plans with HSA’s

28. Wellness Integration: Re-thinking the ROI • Employers shifting focus from medical cost reduction to employee engagement and productivity • Incentive based programs on activity completion and in compliance with ACA • Works well with defined contribution approach attaching rewards to their spending account.

29. Private Exchange: New Bases to Cover for Sustainability

30. Thank You