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Snook -Tying strategy and benefit design
Snook -Tying strategy and benefit design
Snook -Tying strategy and benefit design
Snook -Tying strategy and benefit design
Snook -Tying strategy and benefit design
Snook -Tying strategy and benefit design
Snook -Tying strategy and benefit design
Snook -Tying strategy and benefit design
Snook -Tying strategy and benefit design
Snook -Tying strategy and benefit design
Snook -Tying strategy and benefit design
Snook -Tying strategy and benefit design
Snook -Tying strategy and benefit design
Snook -Tying strategy and benefit design
Snook -Tying strategy and benefit design
Snook -Tying strategy and benefit design
Snook -Tying strategy and benefit design
Snook -Tying strategy and benefit design
Snook -Tying strategy and benefit design
Snook -Tying strategy and benefit design
Snook -Tying strategy and benefit design
Snook -Tying strategy and benefit design
Snook -Tying strategy and benefit design
Snook -Tying strategy and benefit design
Snook -Tying strategy and benefit design
Snook -Tying strategy and benefit design
Snook -Tying strategy and benefit design
Snook -Tying strategy and benefit design
Snook -Tying strategy and benefit design
Snook -Tying strategy and benefit design
Snook -Tying strategy and benefit design
Snook -Tying strategy and benefit design
Snook -Tying strategy and benefit design
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Snook -Tying strategy and benefit design

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Tying strategy and benefit design …

Tying strategy and benefit design

Matthew L. Snook

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  • 1. HR Florida 2011 Tying Strategy and Benefit Design Learning to Look ForwardMatthew L. Snook, Partnermatthew.snook@mercer.com813 207 6312 Services provided by Mercer Health & Benefits LLC. Proprietary & Confidential – Not to be reproduced and/or distributed; contents intended solely for use of intended recipient(s).
  • 2. Today’s Topic and Its Component Parts The problem The concept The process – Context – “Guiding Principles” – The pathway Relevant input factors The results – a case studyMercer Proprietary & Confidential – Not to be reproduced and/or distributed; contents intended solely for use of intended recipient(s). 1
  • 3. The ProblemProprietary & Confidential – Not to be reproduced and/or distributed; contents intended solely for use of intended recipient(s).
  • 4. The Problem ….with decisions relating to how benefit programs are designed, and how benefit dollars are spent. Too seldom do HR leaders connect corporate needs, driven by C-Suite guidance,…..Mercer Proprietary & Confidential – Not to be reproduced and/or distributed; contents intended solely for use of intended recipient(s). 3
  • 5. The ConceptProprietary & Confidential – Not to be reproduced and/or distributed; contents intended solely for use of intended recipient(s).
  • 6. The Concept Corporate HR Total Rewards Benefits Health PlanMercer Proprietary & Confidential – Not to be reproduced and/or distributed; contents intended solely for use of intended recipient(s). 5
  • 7. The ConceptStart high and let things “trickle down” Corporate Goal Revenue growth HR Goal High level of employee engagement Total Rewards Ties between revenue growth and Goal rewards opportunities/results Benefits Goal Incorporation of “success-sharing” aspects in program design Health Plan Direct link between revenue growth and Goal health plan deliveryMercer Proprietary & Confidential – Not to be reproduced and/or distributed; contents intended solely for use of intended recipient(s). 6
  • 8. The ConceptGoals lead to strategies which lead to tactics Health Plan Direct link between revenue growth and health Goal plan delivery Health Plan Tie health plan “value” to varying levels of Strategy corporate revenue growth Health Plan Vary employee contribution rates based on Tactics prior year revenue growth success Tie FSA/HRA/HSA account contribution to prior quarter revenue growth success Tie key cost sharing provisions (copays, deductible, etc.) to prior year revenue growth successMercer Proprietary & Confidential – Not to be reproduced and/or distributed; contents intended solely for use of intended recipient(s). 7
  • 9. The Concept – The Foundations for Health Care Strategy Development Organization Culture Platform Taking care of OUR PEOPLE allows them to take care of our customers, without distraction. Taking care of OUR CUSTOMERS guarantees OUR SUCCESS as a company. These are our goals, in this order. Total Rewards Strategy • Base Pay will be market and industry competitive • Benefits will be above market competitive (60th to 75th percentile) • Variable Pay will allow for above-market total cash compensation (60th percentile) • Long-Term Incentives will allow those eligible to achieve total compensation at the 75th percentile or higher • The ABC Work Experience will enhance the Associates’ lives Components of Total Rewards Compensation Long-Term The ABC Work (Base and Benefits Incentives Experience Variable Pay)Mercer Proprietary & Confidential – Not to be reproduced and/or distributed; contents intended solely for use of intended recipient(s). 8
  • 10. The Concept – The Foundations for Health Care Strategy DevelopmentTotal rewards viewpoint Benefits • Ahead of market in “key” benefits areas • At market in non-key areas • Never a reason why an Associate would leave ABC Components of Total Rewards Compensation Long-Term The ABC Work (Base and Incentives Experience Variable Pay)Mercer Proprietary & Confidential – Not to be reproduced and/or distributed; contents intended solely for use of intended recipient(s). 9
  • 11. The ProcessProprietary & Confidential – Not to be reproduced and/or distributed; contents intended solely for use of intended recipient(s).
  • 12. The Process Mercer’s five-step consultative / strategy process Understand context 1 Where are we, and where Implement, manage do we want to go? 4 and measure External environment Build and run Market position Measure Business context Improve Financial drivers HR objectives Strategize / Analyze 2 What are the rules that Refresh dictate how we accomplish 5 Performance to our goals? expected Stakeholder input Use of data to drive Guiding principles process Define measurement Roadmap adjustment parameters Design 3 What is the pathway by which we will get there? Consider innovations and alternatives Assess impact of solutions Design and integrateMercer Proprietary & Confidential – Not to be reproduced and/or distributed; contents intended solely for use of intended recipient(s). 11
  • 13. The Process – Context 1Goals that might contribute to determination of direction Revenue Growth (M&A, Organic Maximize Profitability Growth) Determine ROI of Various Aspects Brand Awareness/Improvement of Total Rewards Diversification or Focus on “Core Employee Value/Satisfaction Values” Improvement Turnover Control Employee Engagement/Motivation Culture Development Cost/Value Realignment Expense Management/Reduction Participant Education Respond to Aging Workforce Population Health Improvement Issues Consumer Engagement Establish Appropriate Competitive Administrative Simplification PositioningMercer Proprietary & Confidential – Not to be reproduced and/or distributed; contents intended solely for use of intended recipient(s). 12
  • 14. Components to Consider in the Context Discussion 1Where are we today? Plan Design 1 2 3 4 5Rich program with Some consumerist Account-based plan Account-based plan has Design supports very little features and/or as option and highest enrollment competitive position; plan employee cost- promoted design promotes incentives in some Eliminate all first dollar sharing plans coverage behavior change Health Management 1 2 3 4 5Case management Isolated programs Integrated programs Integrated programs Integrated programs only program covering parts of health covering part of health covering full health risk cover full health risk provided risk spectrum; little risk spectrum; partial spectrum; entire spectrum; highly communication population; well population; not highly communicated with communicated communicated incentives offered Employee Incentives 1 2 3 4 5 No incentives for Offer raffles and other Offer significant Offer incentives for Connect incentives to any consumer or nominal incentives for incentives (~$100) for various health plan design, payroll wellness-related health fair participation or HRA participation or management activities contributions or actions certain employee actions other activities throughout the year contributions to an accountMercer Proprietary & Confidential – Not to be reproduced and/or distributed; contents intended solely for use of intended recipient(s). 13
  • 15. Components to Consider in the Context Discussion 1Where are we today? (cont’d) Consumer Education & Participation 1 2 3 4 5 Basic tools and Enhanced tools Enhanced tools Tools targeted to Personalized tools and communication provided by health provided to all support necessary communication provided by health plans; not highly membership; solid behavior change; highly integrated with program plans communicated communication communicated offerings Leadership Engagement 1 2 3 4 5Little awareness of Leadership engaged in Leadership sets strategy, Leadership engaged in Leadership visiblyhealth care strategy strictly cost control but does not provide setting strategy and supports and promotes a direction or resources for provides support for health & wellness enacting strategy engagement activities “campaign” Program Measurement 1 2 3 4 5 Manage year-to- Monitor financial budgets Document program Complete “dashboard” Understand cost drivers year financial proactively; measure expectations and of key performance in program; design budgets only administrative measure results of metrics and share with interventions to support performance vendor and plan business partners strategy performanceMercer Proprietary & Confidential – Not to be reproduced and/or distributed; contents intended solely for use of intended recipient(s). 14
  • 16. The Process – Guiding Principles 2 Guiding Principles: – Are the basis for developing the proposed strategy – Are used to test whether the strategy still “fits” as decisions and adjustments are made Guiding Principles often address the following: – Needs indicated by the business environment – Goals of offering the benefits program – Comfort with being on the leading edge – Desired positioning relative to peer groups – Split of employer and employee responsibility – Absolute “musts” of “must not” be touched/ jeopardized (“sacred cows”) Guiding Principles should be developed based on the information gathered from leadership and/or project team input.Mercer Proprietary & Confidential – Not to be reproduced and/or distributed; contents intended solely for use of intended recipient(s). 15
  • 17. Sample Guiding Principles 2One-page, little detail Benefits targeted at market median with fewer, more meaningful choices Company cost growth to be managed proactively while continuing to provide a safety net for employees Maintain commitment to employees but reduce subsidies for dependents More cost shift through plan design while maintaining protection for catastrophic events Create a culture of health with visible leadership support Manage health care costs through greater focus on health improvement and appropriate use of health care services for employees and their families Offer wide provider networks but encourage use of the most effective providers Develop and broadly share dashboard of key program metrics on a regular basisMercer Proprietary & Confidential – Not to be reproduced and/or distributed; contents intended solely for use of intended recipient(s). 16
  • 18. Sample Guiding Principals 2 Much more detailed version Guiding principles Current state Objectives/future stateMarket position Benefits are important but details of the Maintain competitive position for hourly programs are not a critical driver of employees attraction/retention (A/R) for most Ensure better employee understanding and hourly employees satisfaction through improved employee Benefits are competitive for hourly communications population, less so for salaried Explore option of maintaining separate associates hourly/salaried programs to ensure ongoing competitiveness of salaried benefitsCompany budget/cost-sharing Control of cost growth is critical, but Proactively manage company cost growth due there is no burning platform to reduce to pressures including rising transit costs company cost levels Manage health care costs through greater focus Cost sharing (payroll deductions) with on condition management and health salaried employees seen as improvement uncompetitive Minimize or negate impact of Health Care Reform (HCR) Improve salaried employee cost share percentageProgram eligibility Eligibility is 35 hours/week Shift PT employees with <35 hours to <30 hours Market is changing to reflect HCR by 2014, as dictated by HCR changes and requirements Vary eligibility by business unit as A/R needs Benefits are not a significant A/R issue dictate for employees under 35 hours Mercer Proprietary & Confidential – Not to be reproduced and/or distributed; contents intended solely for use of intended recipient(s). 17
  • 19. Sample Guiding Principals 2 Much more detailed version (cont’d) Guiding principles Current state Objectives/future stateEmployee choice and Three medical plan choices are Continue to offer choice among plans, includingresponsibility (plan design) offered, including one catastrophic a catastrophic option design, with varying enrollment Promoting personal responsibility is culturally consistent and should be a part of design. More exploration of receptivity to CDH is needed, but of interest.Program/vendor management • All health coverages - medical, Rx, Evaluate vendors for best discounts, best fit, health management, EAP, dental - are lowest net cost to ABC with one vendor Ensure all vendors meet employee needs for • Communications materials not used by quality and access employees, not effective at reaching Ensure medical vendor can support them, and not engaging them consumerism needs with or without CDH Employees have multiple access points to program information and understand how to access itHealth management Health management programs are a Cost drivers are better understood function performed by the medical plan Offer care/disease management programs that vendor are specific to ABC’s needs Little encouragement for employees to Motivate employees to understand and improve understand or improve health status their health through variety of programs and Little understanding of health care incentives drivers or impact of existing programs Mercer Proprietary & Confidential – Not to be reproduced and/or distributed; contents intended solely for use of intended recipient(s). 18
  • 20. The Process – Developing the Pathway 3High-level strategic roadmap The final step in developing a strategy should be developing the strategic roadmap The roadmap will help you evolve from the current state to where you optimally want to be across all aspects represented in the Guiding Principles This will allow you to come to an understanding as to how the details of the strategy will be created and implemented and when/how results will be measuredMercer Proprietary & Confidential – Not to be reproduced and/or distributed; contents intended solely for use of intended recipient(s). 19
  • 21. Strategic Roadmap – Key Ingredients 3 Strategy elements, levers and outcomes measurementStrategy Elements Success Levers Measures Plan Health improvement Education and Element 1 Plan administration Measure 1 design/pricing and care delivery communication Plan Health improvement Education and Element 2 Plan administration Measure 2 design/pricing and care delivery communication Plan Health improvement Education and Measure 3 Element 3 Plan administration design/pricing and care delivery communication Plan Health improvement Education and Element 4 Plan administration Measure 4 design/pricing and care delivery communication Plan Health improvement Education and Measure 5 Element 5 and care delivery communication Plan administration design/pricing Lever of lesser impact for this goal Mercer Proprietary & Confidential – Not to be reproduced and/or distributed; contents intended solely for use of intended recipient(s). 20
  • 22. Sample Plan Evolution Approach 1 3 Change over time 2011 2012 2013 2014 2015 Current Plan 1 Current Plan 1 EvolvedCurrent Current Plan Hybrid Plan Hybrid Evolved Plans Current Plan 2 Current Plan 2 Evolved New Plan End-State Evolved Plan 1 New New Plan Plans New Plan 2 End-State Plan 2 Mercer Proprietary & Confidential – Not to be reproduced and/or distributed; contents intended solely for use of intended recipient(s). 21
  • 23. Sample Plan Evolution Approach 2 3More aggressive implementation approach 2011 2012 Current Plan 1 Current End-State Plan 1* Plans Current Plan 2 New End-State Plan 2 Plans * Hybrid of current plans 1 and 2.Mercer Proprietary & Confidential – Not to be reproduced and/or distributed; contents intended solely for use of intended recipient(s). 22
  • 24. Sample Roadmap 3 Current year Year 1 Year 2 Year 3 Year 4D Add employee D Improve preventive health (with D Incent retail clinic usage ($0 co- D Raise deductible on PPO to D Eliminate PPOassistance program incentive of $10/service into FSA pay for 6 months, then $10) build in incentive offset D Offer only two CDHPsD Adjust contributions or premium reduction/holiday) D Eliminate EPO D Add second CDHP D Deliver all incentives throughD Add voluntary D Unbundle dental/vision D Add CDHP (HRA/HSA) H Continue health campaign and tax-advantaged accounts; increasebenefits D Modify PPO and EPO Rx co- D Further align PPO with champion activity amount “at risk” to $500H Conduct health pays to coinsurance consumerism and CDHP H Promote use of personal health H Continue health campaign andassessment with D Adjust contributions to align with H Continue health campaign and record champion activityincentive ($100 to FSA) value of plans champion activity H Continue health assessment, H Add health advocate H Add targeted behavior biometrics and targeted behavioral H Add health campaign with modification program with modifications with significant champion support incentives (TBD, “health” day time incentives as appropriate H Update employee health off) assessment and add biometric H Promote employee and spouse screenings, both with incentives health assessment and biometric ($50/$50 to FSA) screenings ($50/$50 to FSA/CDHP)Success metrics: Success metrics: Success metrics: Success metrics: Employees understand Employees make informed value- Spouses are further engaged in Employees further engaged,employer’s interest in based choices on Rx their own health risks involved and informed around theirtheir health Employees value flexibility in Action plan for behavior health and use of health care Employees understand benefit choices modification servicestheir own health risks Increased usage of preventive Promoting choice for best Better choices, better health Employees recognize health services Culture of health reinforcedgreater benefit choices Employees with chronic Change to “culture where healthand services conditions and health issues have matters” begins access to enhanced support Employees see their peers participating D = Design H = Health Mercer Proprietary & Confidential – Not to be reproduced and/or distributed; contents intended solely for use of intended recipient(s). 23
  • 25. Summary Document – The Strategic Placemat Environment Guiding principles Strategy Actions Barriers Success measuresABC population Benefits targeted at Provide more Eliminate redundant plan Employee resistance A successful program at 8,000 active and 20,000 market median with meaningful options over a two year to plan eliminations ABC would have: retired employees fewer, more benefit choices, period High levels of program meaningful choices with limited Cooperation, dataBusiness environment participation design changes Develop integrated set of sharing and Excellent business outlook Company cost care management integration across Employees see the value of Need to attract / retain (up growth to be Engage programs encompassing vendors managing their health and to 5,000 new employees managed employees and wellness, risk reduction are willing to do their part over next 3– 5 years) to proactively, while their spouses to and chronic care Culture: employees are very driven and Health improvements shown meet production goals; continuing to actively manage management focusing on health through: aging workforce, growing provide a safety net their health need for seasoned for employees Build programs off existing may be a challenge – increased use of supervisors Leverage vendor partnerships, add only preventive screening Create a culture of partner programs where needed HR reps need to allowHealthCare at ABC employees to take – increased productivity health with visible as well as other Limited ability for plan leadership support programs Develop ongoing ownership and – decrease and better design and contribution adopted by ABC leadership engagement accountability management of changes – need to focus on Manage health campaign Remote geographic chronic conditions behavior change care costs through Provide ongoing, Have implemented health greater focus on targeted Develop targeted education locations limit access High health care compliance fairs, industrial trainers, health improvement education and and communications to health care and outcomes resulting in biometric screening. Good and appropriate communication to campaign with ongoing cost savings and reduced events throughout the year Geographic health participation and use of health care employees and liability habits and influences acceptance services for spouses Reward employees and ABC perceived as not only a Multiple programs available employees and their dependents for Lack of surrounding safe company, but healthy their families Recognize and community support through current vendors, but reward effective participation in health as well lack of participation and management programs and community Develop and health activities Achieve health care trend integration broadly share management Develop data collection below the benchmark – be Health care cost trend dashboard of key Management ROI the benchmark approximately 8%; cardiac Actively manage and dashboard tools for program metrics on ongoing program expectations – having and diabetes are significant a regular basis health care and to spend in order to cost drivers vendor costs measurement save Mercer Proprietary & Confidential – Not to be reproduced and/or distributed; contents intended solely for use of intended recipient(s). 24
  • 26. Relevant Input FactorsProprietary & Confidential – Not to be reproduced and/or distributed; contents intended solely for use of intended recipient(s).
  • 27. Relevant Input FactorsMarket conditions impact employer benefit decisions The economy Legislative agenda Emerging from recession Addressing reform Emerging from the recession, Employers are anticipating both employers and employees face tactical and strategic uncertainties about the future. implications of the health reform Although careful management law. Compliance with eligibility held trend down in 2009, trend and benefit mandates is a short- increased in 2010 and employers term concern. More complex will continue to face health trends challenges may come from cost that require innovative ideas about shifting and ERISA challenges. how to control cost and improve workforce productivity. Vendor market Health care Uncertain future Quality Health plans face increasing Assuming as much as 1/3 of scrutiny about their practices as health care spending may be legislators try to expand regulation. inappropriate or unnecessary, In the short-term, rates are rising employers are testing innovative due to unknown impact of health ways to improve quality. Ideas reform and other issues. include behavior change Conservative rates are likely to incentives for both patients and continue as insurers evaluate their providers, new care management future under increasing regulation. models, domestic tourism and more evidence-based design.Mercer Proprietary & Confidential – Not to be reproduced and/or distributed; contents intended solely for use of intended recipient(s). 26
  • 28. Relevant Input FactorsHealth benefit costs still rising at unsustainable levels20.0% Workers earnings Annual change in total health benefit cost per employee18.0% Overall inflation 17.1%16.0% 14.7%14.0%12.0% 12.1% 11.2%10.0% 10.1% 10.1% 8.0% 8.0% 8.1% 7.5% 6.9% 7.3% 6.3% 6.1% 6.1% 6.1% 6.4%* 6.0% 6.1% 5.5% 4.0% 2.5% 2.0% 2.1% 0.0% 0.2% -1.1% -2.0% 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 *Projected Source: Mercer’s National Survey of Employer-Sponsored Health Plans; Bureau of Labor Statistics, Consumer Price Index, U.S. City Average of Annual Inflation (April to April) 1990-2010; Bureau of Labor Statistics, Seasonally Adjusted Data from the Current Employment Statistics Survey (April to April) 1990-2010.Mercer Proprietary & Confidential – Not to be reproduced and/or distributed; contents intended solely for use of intended recipient(s). 27
  • 29. Relevant Input FactorsBehaviors are key cost drivers Determinants of Health Status 50% 40% 30% 20% 10% 0% Access to Genetics Environment Behavior Care Determinants 10% 20% 20% 50% Source: IFTF, Center for Disease Control and PreventionMercer Proprietary & Confidential – Not to be reproduced and/or distributed; contents intended solely for use of intended recipient(s). 28
  • 30. Case StudyProprietary & Confidential – Not to be reproduced and/or distributed; contents intended solely for use of intended recipient(s).
  • 31. Mercer Case Study Process, actions, resultsContext Guiding Principles 1/3 of active employees in unions Educate employees on the costs of health care and what they can do to impact them Rising health care costs, utilization skyrocketing Improve health management and improvement efforts, Three health plans: one HMO, two PPOs, with high and link to medical design employee satisfaction Hold costs steady, reduce trend over time No employee understanding of health costs Help lower wage employees Options priced poorly relative to actuarial value Improve negative utilization trendsStrategic Plan Measurement Results Full replacement of health plans, and implementation 47% of employees in HSA, 53% in HRA of HRA and HSA plans First year claims 17% under budget Launch multi-media communication campaign focused on employee education Employee satisfaction remained high Use cost-estimator tool to educate employees on plan value Utilization statistics changed drastically Lower wage employees provided higher account – Reduction in specialist, laboratory and radiology, funding levels and brand drug usage – Increase in PCP, generic/mail order, and in-network provider usage Mercer Proprietary & Confidential – Not to be reproduced and/or distributed; contents intended solely for use of intended recipient(s). 30
  • 32. Final ThoughtsRelevant facts for plan design decisions Employees dislike change, especially with “security blanket” issues. Employees like cost predictability (i.e., copayments). Inertia is very powerful, even when not in the employee’s best interest. No one spends someone else’s money the same way they spend their own. Every American knows smoking is bad for you, yet 21% of us smoke. People who eat chocolate cake, red meat, gravy on their potatoes and butter on their biscuits do it because they like it! Real Change is Hard – Proceed with CautionMercer Proprietary & Confidential – Not to be reproduced and/or distributed; contents intended solely for use of intended recipient(s). 31
  • 33. www.mercer.comProprietary & Confidential – Not to be reproduced and/or distributed; contents intended solely for use of intended recipient(s).

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