https://www.compandbenefitstoday.com/frs/23543534/how-can-you-aggressively-manage-benefits-affordability-/email Benefit cost increases regularly eclipse all other costs for organizations, yet bringing costs down is illusive. Now corporate priorities are swinging from solely a focus on talent to the need to actively manage benefit expenses, but no one wants to reduce benefits or ask employees to pay more. Join two total rewards experts, Alex Anderson and Leo Tokar, for an in-depth discussion on tactics to efficiently and effectively control and manage benefit cost. This session will address critical questions such as: • What are the driving factors driving cost increases? • What are specific tactics that will allow you to control cost drivers? • How do you manage costs not just for 1 year, but 3-5 years out? • What are the tools you need to manage costs effectively?

5. How Can You Aggressively Manage
Benefits Affordability?
Comp & Benefits Today Webinar | May 24th, 2023

6. High-Level
• Healthcare cost & trend drivers
• Analytics & solutions
• Strategy design

7. 7
LOCKTON COMPANIES | 7
LOCKTON COMPANIES |
Market landscape
CONSUMER EXPECTATIONS
CONTINUE TO RISE
COMPETITIVE LABOR
MARKET
POLICY CHANGE & COMPLIANCE
COMPLEXITIES
EMPLOYERS SHIFT IN
PRIORITIES
NEW MARKET SOLUTIONS
INFLATIONARY PRESSURES

8. 8
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Navigating healthcare
Population Health
Solutions
Analytics
Read Admission
Management
Referral Management
Care Coordination
Medication Adherence
Diabetes Management
Behavioral Health Other Disease
Management
Health & Wellness
Optimization
CCM/TCM
HSA / Transparency
ACO Enablement
Bundled Payments
Telemedicine
Risk-Bearing Providers
On-demand Healthcare
Post Acute Care
Consumer Tools
Second Opinion
TECHNOLOGY
INFRASTRUCTURE
DISEASE
MANAGEMENT
CARE
MODELS
PAYMENT
MODELS
YOUR
COMPANY

9. 9
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Utilization
Service Mix
Provider Type
What can you manage?
Measurement / Management / Risk Transfer
Unit cost
Provider contracts
Care venue
Plan Design
OOP Cost
Un/Covered Services
Vendor Fees
Government Fees
Systems / Resources
Eligibility
(EE & Dependents)
Health Risks
Engagement
Total Cost
(Price x Quantity – Cost Share + Administration) x Population

10. 10
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What influences cost? And cost trend?
Trend
• Large/complex claims
• Specialty medications
• Hospital unit costs (emerging)
Cost
• Population risk
o Health conditions/needs
o Care gaps
o Social determinants
• Unit cost
o Hospital contracts
o Pharmacy pricing
o New procedures/technologies
• Utilization
o Over/underutilization
o Specialty meds
o New procedures/technologies
• Service mix
o Redundancy/unnecessary care
o Venues of care
o Alternate treatments
• Administration
o TPA fees
o Shared savings charges
o Hidden fees
o Reserves & margin
o Gov’t taxes/fees

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Questions you should answer…
Primary
• What trade-offs am I willing to make? (e.g., savings vs. employee disruption)
• What specific goals do I want to accomplish in 3-5 years?
Tier-II
• What specific areas are driving my cost?
• What specific area driving my cost trend (increase)?
• What parts of those drivers are actionable?
• How do I influence the 50% of Rx that is under my medical spend?
Tier-I
• Am I on the right funding arrangement?
• Am I on the most efficient medical provider network(s)?
• How to I improve my pharmacy management?
• Does my stop loss have the right risk/reward balance?
• Can I tighten my Out of Network (OON) spend?
• Where can I reduce my administration costs and fee leakage?
Tier-III
• (Questions targeted at specific opportunities)

12. 12
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Medical network spectrum of solutions
*Reflects ‘Broad-Based’ National PPO
National Solutions Local Solutions
National & Local
Solutions
Anticipated
Financial
Impact
Current PPO* Optimized
PPO*
PPO with Alternative
Network in Limited
Locations
High Performance
Network
ACOs with
Steerage
Direct Contracting Centers of
Excellence
Specialty
Contracting

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LOCKTON COMPANIES |
Choosing the best network
$0
$1.0M
$2.0M
$3.0M
Med Savings Rx Savings
Product: Option 1 Option 2 Option 3 Option 4 Option 5 Option 6
% of EEs in Strategy 1% 3% 0% 100% 100% 100%
% Total Savings 4% 0% 15% 11% 8% 6%
Total Savings $ $0.77M $0.07M $3.10M $2.11M $1.65M $1.25M
% Visits Moved to OON 3% 2% 4% 3% 4% 3%
Employee Friction Medium Low High High Medium Medium
Provider Disruption 3% 2% 4% 3% 4% 3%
Medical Management PCP Gated Standard Offering Standard Offering
Variable Copay
Steerage
Variable Copay
Steerage
Variable Copay
Steerage
Out of Network EPO EPO Possible Balance Billing 80% of R&C 80% of R&C 80% of R&C

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Healthcare delivery solutions progression
• Wide range of pricing
• Variety of quality
• Limited engagement tools
• Restricted access to data
Broad Based
PPO Networks
• Disease specific (Diabetes,
Maternity, etc.)
• Pharmacy solutions
• Mental Health
• Bundled Surgery
• Virtual Care 2.0
Point Solutions
• Access to carrier
networks with deeper
discounts
• Performance network
options
• Better access to data
• Innovative, member-
focused solutions
New TPA
Solutions
• Line of service steerage
• High performance network
solutions
• Reference-based pricing
• Navigators
Innovators
General Market
Progressive
Mainstream

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Pharmacy cost management
Contract Reviews
❑ Ensure appropriate definitions for
brand, generic, and AWP
❑ Structure dollar-for-dollar pricing
guarantees
❑ Structure objective audit
procedures
❑ Define clear algorithms for
guarantee and penalty
calculations
❑ Assesses performance of current
contract
❑ Pricing terms, disease state and
drug mix analysis with drug
interchange opportunities
❑ Project employer savings if we
shopped PBMs today
❑ Specialty drug review
❑ Objective analysis with
transparency and no carrier/PBM
specific incentives
❑ Rigorous financial valuation of all
proposals, quantify drug mix
savings and pricing terms savings
❑ PBM must submit to certain
contract provisions, guarantees,
and annual audits prior to being
awarded business
❑ Annual pricing reconciliation
based on all Rx claims
❑ Based on all information affecting
employer cost: discounts,
dispensing fees, rebates, admin
fees, brand vs. generic
classification, and formulary lists
❑ Employers receive penalty check
if guarantees were not met
Diagnostics
PBM Procurement &
Renewals
Independent annual
audits

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Pharmacy cost containment strategies
• Narrow the network for maintenance fills
(voluntary vs. mandatory)
• Custom network
• Custom edits and/or formulary
• Reference based pricing
• Adherence tactics
• Member and provider education
• Carve-out utilization management
and/or dispensing
• Alternate funding
• Medical specialty management
• Value based contracts
Purchasing Efficiency
Pharmacy Network
Utilization Mgmt.
Specialty Drug Mgmt.
MOST COMMON
• Best-in-class contract terms
• Aggressive financial guarantees
(discounts, rebates and dispensing fees)
• Pricing reconciliation audit
• Exclusive specialty
• Broad retail 30
• Option to use mail
• Member & provider education
• Formulary management
• Drug exclusions
• Prior authorization
• Step therapy
• Quantity limits
• DAW penalties (DAW 1 & DAW 2)
• Formulary and utilization management
tools
• Specialty copay assistance program
• Medical drug management

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Using data to define your focus
80% of your costs will be driven
by 8% of your members
BUT
76% of your members will spend
less that $2,000 in claims

18. 18
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Risk and Chronic Condition Impactability
Risk & chronic conditions example
Data mining for opportunities
Population Risk Stratification:
• Enables prioritization
• Highlights impactability
• Reveals cost and risk
• Comparison to norms

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Using data to improve outcomes BEFORE STATE
• HIGHER than norm:
• Fertility tests and treatments
• Average maternal age
• High-risk pregnancy
• C-Section rates
• Multiple births
• Preterm births
ACTION: PROGRAMS TARGETED AT FERTILITY
COUNSELING & HIGH RISK PREGNANCY
AFTER STATE
• LOWER than norm:
• C-Section rates
• Multiple births
• Preterm births

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Complex claims management
• High-cost claimant predictive analysis
• Best-in-class pricing and contracts
• No laser at renewal guarantee
• Plan mirroring, gapless coverage
• Utilization and site of care review
• Specialty center collaboration
COST TRIGGERS
CLINICAL REVIEWS
STOP LOSS INTEGRATION
Impact areas

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Aggressive cost optimization
1. Reference pricing → Significantly lowers unit costs reimbursed for services
2. Unbundled/assembled program → Optimize components based on care vs cost
• Modular benefits / care direction (i.e., benefits vary by consumer choices)
o Or high cost share plan
• TPA/ASO
• Direct primary care (DPC) or on-site clinic
• Gatekeeper for specialty care direction
• High performance network or direct contract
• Reference pricing for transactional services (e.g., imaging)
• Specialty network with bundled payments (e.g., surgeries)
• Targeted disease management for prevalent conditions with care gaps
• COEs + Complex claims management program + stop loss purchasing
• Aggressive pharmacy purchasing + narrow network + clinical programs
3. ACO → Enhanced quality with some price trade-off

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Envisioning the future
Strategy scenarios & savings tactics
Multi-Year Plan
Projected cost with trend
Purchasing efficiency, eligibilty management, cost sharing
Add wellness
$10M
2023 2024 2025 2026 2027 2028
Purchasing
Efficiency
Eligibility
Management
Health Risk
Solutions
Participant
Cost-sharing
Participant
Cost-sharing
Purchasing Efficiency
Health Risk
Solutions
Eligibility Management

23. 23
LOCKTON COMPANIES |
Closing comments
LOOK INWARD
to understand your workforce and its profile
unique
LOOK FORWARD
to sequence the solutions that align with
your goals
LOOK OUTWARD
to understand solutions that fit w/your
population
LOOK BACKWARD
to dissect your cost
Full Spectrum
Understanding Your
Opportunities

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