This document summarizes a panel discussion on healthcare reform strategies for employers. The panelists discussed the complex new healthcare environment created by the Affordable Care Act and strategies employers are considering. These include evaluating options like public insurance exchanges, defined contribution plans, and private exchanges. The panel also discussed the City of Greenville's approach of moving to new health plans with larger cost sharing, introducing wellness incentives, and considering a consumer-driven health plan. Strategies gaining more attention included increased focus on wellness engagement, chronic condition management, and high performing provider networks.

1. 1
A Conversation on Healthcare Reform
“Setting a New Strategic Direction”
The City of Greenville, NC
NCLGBA Conference
Wrightsville Beach, North Carolina
July 11, 2013

2. 2
Panelists
 Frank Salvato, Benefits Manager,
City of Greenville, North Carolina
 Steve Graybill, Principal,
Mercer Consulting
 Reggie White, General Manager,
Cigna Government & Education Segment

3. 3
Discussion Topics
 “Tough decisions in this new environment”
 Evaluating “pay or play” and market “exchanges”
 The City of Greenville’s approach to reform
 Strategies that are getting greater attention

4. 4
Tough decisions
 Complex law with varied guidance
 Added cost implications
 Employee anxiety over changes
 Maintaining competitive benefits package

5. PREPARING FOR
HEALTH CARE EXCHANGES
Steve Graybill
Steve.graybill@mercer.com
Not Peer Reviewed

6. 6MERCER
CONTENTS
Evolution of health care benefits environment
Exchange environment
• Public exchanges
• Private exchanges…and defined contribution
Strategic opportunity for employers
6

7. 7MERCER 7
EVOLUTION OF HEALTH CARE BENEFITS ENVIRONMENT
Managed care: thru 2003
Consumerism: 2004 thru
2010
Reform: 2011+
Source: Mercer’s National Survey of Employer-Sponsored Health Plans; Bureau of Labor Statistics, Consumer Price Index, US City Average of Annual Inflation
(April to April) 1990-2012; Bureau of Labor Statistics, Seasonally Adjusted Data from the Current Employment Statistics Survey (April to April) 1990-2012.
Managed care Consumerism Reform

8. 8MERCER
WHAT IS A PUBLIC EXCHANGE?
• Created by ACA
• Structured marketplace to sell and purchase health
insurance
• Subsidies provided for those who qualify based on income
• Goal: Insure all Americans

9. 9MERCER 99
2014 State Exchange Timeline
2012
Dec
2013
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov
Dec
2014
Jan
Dec. 14, 2012
States interested in
operating a state-based
exchange in 2014 were
required to submit a
declaration letter and
an blueprint application to
HHS. In January 2013,
HHS said it will give states
more time to decide
whether to create a state-
run exchange
Feb. 15, 2013
States must submit a
declaration letter and
blueprint application to
HHS to participate in a
state partnership
exchange. Approvals
will be made on a
rolling basis
Jan. 1, 2014
Exchanges operational,
providing health
insurance to individuals
and small business
employees
Apr. 1 – July 31, 2013
HHS advises states
operating a Plan
Management Partnership
Exchange to complete the
plan certification process
during this time
Jan. 1, 2013
HHS issues conditional
approval for state-based
exchanges
Oct. 1, 2013 – Feb. 28, 2014
Proposed initial open
enrollment period for
exchanges
Mar. 29, 2013
HHS advises states
operating a Consumer
Assistance Partnership
exchange to begin
education and outreach
efforts

10. 10MERCER
PUBLIC EXCHANGES
STATUS OF STATE ELECTIONS AS OF 17 MAY 2013
1010
Source: Kaiser Family Foundation
Default to federal exchange
27
Declared state exchange
17
Planning partnership exchange
7

11. 11MERCER 11
WHAT DO THE PUBLIC EXCHANGES DO?
Provide financial management
Ensure plan accountability
Assist consumers
Determine eligibility,
enroll individuals
Manage plan activities

12. 12MERCER
2014: PRODUCTS OFFERED IN EXCHANGES
EXCHANGE PRODUCTS WILL DIFFER FROM GROUP PLANS
Plan options in public exchange are named after metals
Public exchanges ER | Group
Bronze Silver Gold Platinum
Catastrophi
c age <30 and
those eligible for
a hardship
waiver
Plan
design1
Features
Plan
value
60% 70% 80% 90% under 60% >60%
• Silver – second-lowest cost plan – is baseline for calculating government
subsidy
• Government subsidy and member contribution requirement calculated based on
income, vary by level between Medicaid eligibility and 400% FPL
• Once subsidy determined for silver plan, can use for gold plan (pay more) or
bronze plan (pay less)
• No subsidies are available for catastrophic coverage
12
1.Some provisions apply differently for grandfathered and non-grandfathered
plans. Employer plans generally must offer coverage of at least 60% value to full
time employees to avoid shared responsibility penalties.

13. 13MERCER
ELIGIBILITY FOR EXCHANGE PREMIUM TAX CREDITS
BASED ON SECOND-LOWEST COST SILVER PLAN IN 2014
Maximum monthly contribution to avoid employer penalties if using FPL safe harbor
$11,490 x 9.5% ÷ 12 = $90.96 (based on 2013 FPL; safe harbor for 1/1/14 calendar year plans)
Other options for affordable contribution safe harbor are: W-2 earnings and rate-of-pay.
% Poverty
level
Annual
household
income
Plan value with
cost-sharing credit
Maximum monthly employee
contribution in exchange
% Household
income Dollars
<100% <$11,490
Medicaid / Access
gap N/A N/A
<138% <$15,856
Medicaid (if
expanded) N/A N/A
138% $15,856 +24% to 94% 3.00% $40
150% $17,235 +17% to 87% 4.00% $58
200% $22,980 +3% to 73% 6.30% $121
250% $28,725 70% 8.05% $193
300% $34,470 70% 9.50% $273
400% $45,960 70% 9.50% $364
>400% >$45,960 70% No maximum Full cost
Individual in 2014 (Based on 2013 FPL of $11,490)
13

14. 14MERCER
2014: FAMILY COVERAGE IN A PUBLIC EXCHANGE
PREMIUMS AND SUBSIDIES WILL DETERMINE APPEAL
Individual product costs will
vary by state
Total monthly premium at 150% of average
Family of 4 Averag
e
Iowa New York
Silver plan $2,653 $2,202 $2,918
Average
group
plan
total
premium
150
%
Silver
plan
110%
Pay full
premium
$83/month
$49,000$33,000 $100,000
2014 family silver plan total premium
at 150% = $2,653/month
Full premium
at 100%
$1,769/month
1.Oliver Wyman. Impact of PPACA on costs in individual and small-employer health insurance markets
2.Mercer Survey of Employer-Sponsored Health Plans, 2012 – Employers 500+; All employers = $148/month for individual; $544/month for family
Individual product prices could be
higher than in group plans1
– and may rise faster
Average monthly employee
contribution for PPO coverage2
Individual
$111
Family
$391
Family of 4 average household
income
$261/month
14

15. 15MERCER 15
State Exchanges: Interactions Among the Players
W-2, SBC, Communication
Enrollment Coordination
Benefit Eligibility
Plan Value
Coverage Value
Employee Data
Participation
Employer Plan Data
Tax Filing
Penalties
Reporting & Filing
Verify Coverage
Participation
Enforce
Coverage
Mandate
Marketplaces
EMPLOYEES
EMPLOYER
HHS | IRS

16. 16MERCER
WHAT IS A PRIVATE EXCHANGE?
Marketplace with core and voluntary product offerings across
many benefits and services
Exchange sponsor stocks products and manages end-to-end
consumer experience

17. 17MERCER 17
PUBLIC VS PRIVATE EXCHANGES
Medical,
prescription
Dental, vision, life,
voluntary, plus more
Government
sponsored
Broker, insurer, TPA
technology firm
Actives, retirees
PUBLIC PRIVATE
Open Closed
Single or
multiple carrier
Individuals
Small Group
Group plans
Insured or
self-funded

18. 18MERCER
GROWING INTEREST IN PRIVATE HEALTH CARE EXCHANGES
18%
56%
2011 2012
Why are employers looking at
private health care exchanges?
 One-stop shopping across core medical, life,
disability and voluntary benefits
 Technology eases employee decision-
making
 Collective buying power and influence help
control total benefit cost
 Some allow employers to retain control
 Employees are not necessarily opposed to
change, as long as they see financial benefit
Percent of employers
that would consider
offering a private exchange
18

19. 19MERCER
HOW DO PRIVATE EXCHANGES WORK?
Funding:
DB or DC
Employer defined
contribution
Employee
contribution or
combination
Administration
Eligibility
determination
Data-driven
events
Election
management
Contribution
calculation
HR
profes-
sionals
Reporting &
premium data
Employee
support
Online
Call center
Print & e-mail
Integrated benefit processes
PayrollDeductions
Carriers
Election
data
19

20. 20MERCER
Member
service
center
Online
tools
 All benefits – core and voluntary
 Vendor management
 Financial projections
 Open enrollment
 Ongoing event management
 Payroll reporting
 Carrier eligibility reporting
 Premium reporting
 Member service center
 Member communications
 Compliance
 FSA administration
 Health savings accounts
 COBRA administration
Comprehensive solution
MERCER MARKETPLACESM
WHAT WE DELIVER
20
Employee experience
 All insurance needs
met with one-stop
shopping
 Best prices
 Personalized
experience and
portfolio
 Multi-channel, targeted
messaging
 Experienced, objective
benefits counselors
Employer experience
 Comprehensive,
one-stop benefits
management
 Facilitates defined
contribution
 Proactive project
management and
accountability
 Compliance with
evolving legislation
 Purchasing strength

21. 21MERCER
PRIVATE EXCHANGE
VALUE TO EMPLOYERS, EMPLOYEES AND RETIREES
EMPLOYERS
• Improved decision making
• Predictable costs
• Increased employee engagement
• Turnkey, end-to-end solution
• Delegate compliance
EMPLOYEES/RETIREES
• Increased appreciation of benefits
• Expanded choice
• Informed health care decisions
• Better health behaviors
• User-friendly process
21

22. 22MERCER 22
STRATEGIC OPPORTUNITY FOR EMPLOYERS

23. MERCER 23
Group
Self-
insured
Individual
InsuredRISK
ControlNone Total
DIFFERENT INDUSTRIES,
CHALLENGES AND DIRECTIONS
Exchange
Exit
Maintain
Delay
23

24. MERCER 24
BROADER REWARDS CONSTRUCT
Benefits
Life balance
Pay
Career
24

25. 25MERCER
The City of Greenville’s Approach
Frank Salvano, Benefits Manager
25

26. 26
The City of Greenville’s approach
 Key challenges to address with PPACA
 Continued sustainability of affordable health benefits
 Engagement of employees in living a healthier life style
 Moving from an entitlement mentality to one of partnership
 Migrating to an outcome based Health Management Program
 Address paying for the coverage of dependents

27. 27
The City of Greenville’s approach
 Strategic plan to reduce the cost of health care
 Started in January 2010 for Health Plan and Wellness Initiative
 Detailed discussion with consultant Mercer
 Ensuring alignment with current PPACA mandates
 Developed employee communication plan
 Key mandates of particular focus
 Eligibility of employees working 30 hours of more
 Paying for at least 60% of health care expense
 Available to 95% of employees
 Affordable at 9.5% of household income

28. 28
The City of Greenville’s approach
 Our health plan strategies to reduce costs
 Had two self funded health plans – basic (90/10 plan)
and enhanced (co-pay only)
 Moved to new basic 80/20 and enhanced 90/10 plan
 Created larger cost differential between basic and
enhanced plan
 85% of employees on the enhanced plan
 City paid for 100% of premium increase to basic plan
 Shared increase with enhanced plan
 Result- employees migrated to basic plan
 Ensured alignment with current PPACA mandates

29. 29
The City of Greenville’s approach
 Wellness strategies to reduce costs
 Introduced monetary incentive for employees to complete
biometric screening and health risk assessment
 $25 gift certificate produced 23% engagement
 $150 gift card produced 43% engagement
 Moved to a Health Management Points Program in year three
 Employees earn points in three areas
Preventive care
Health carrier programs (disease management)
Wellness activities (2,000 activity minutes per quarter)
$150 gift care incentive with possibility of drawing entry
Also introduced a spousal and tobacco user surcharge

30. 30
The City of Greenville’s approach
 What’s next ?
 Introduction of a third health plan
 CDHP with an H S A or H R A
 Hoping to migrate about 20% of employees to this plan
 Use Health Mgmt Points Program as gateway to enhanced plan
or to qualify for premium discounts on all plans
 Believe we will engage greater than 80% of employees.

31. 31MERCER
Strategies Getting More Attention
Reggie White, General Manager, Cigna
31

32. 32
Strategies getting more attention
 Wellness and health management engagement
 More comfort with privacy around engagement
 Focus on employee communication to drive adoption
 ROI discussions and vendor guarantees on improvement
 Chronic condition management (ex. Diabetes)
 Greatest consistent impact on health care costs (5/50)
 More client attention to intervention and true health impact
 Provider, facility, and network solutions
 High performing networks for quality/cost steerage
 “Accountable care” and patient centered medical “homes”
 Client/hospital partnerships expanding

33. 33
Closing and Q & A
We appreciate your participation in this discussion
Thank you