Wa vbis-2012-0508

A Buck Consultants Webinar

Amy Hollis, National Practice Leader, VBIS

May 8, 2012

Buck Voluntary Benefits Integrated Solutions (VBIS)

Making Voluntary Benefits

an Employer Benefit Buck Voluntary Benefits Integrated Solutions (VBIS)

VBIS Objectives

2

• Objective #1: Overarching employee focus – complement and enhance plan

design and delivery to attract and retain talent

• Objective # 2: Strategic employer focus – lower overall benefit spend, while

adhering to Objective #1


VBIS Mission Statement

To ensure and maintain our presence as the nation’s preeminent Voluntary

Benefit practice by:

• Responsibly and creatively crafting employer Voluntary Benefit solutions

that support our clients’ overall benefit and corporate objectives

• Maintaining the highest level of business integrity with full disclosure

• Focusing on long-term, sustainable relationships with our clients

• Working to support the financial well-being of our employer clients and their

employees

Setting the Stage A Couple of Underlying Premises Before We Get Started…

3


Measuring Financial Impact of Benefits Establishing the Scale

How successful are your

benefits in attracting talent?

• Added financial security

• Savings for employees

• Favorable employee

perception of employer

• Time-saving convenience

4

Talent

Expense

Favorable Benefits ROI = retention of talent outweighs the expense of the benefits


What is your investment in your

benefit program in terms of:

• The cost of premiums, claims or

insurance

• The cost of communication and

engagement

• The cost of administering your

plans

• The cost of consulting expenses

Measuring Financial Impact of Voluntary Benefits Using the Same Scale

5

Employer $ Impact = Higher Retention


Lighter

Expense

How can voluntary plans

actually reduce your benefit

expenses?

• Medical plan design modification

to reduce claims or premium

expense

• Drive positive medical plan

selection

• Subsidize communications,

administration or consulting

expenses through permissible

channels

Heavier

Talent

Employer $ Impact = Lower Expenses

How effective are the voluntary

plans in attracting and retaining

talent?

• Added financial security

• Savings for employee

• Favorable employee perception

of employer

• Time-saving convenience

Voluntary Benefit Marketplace Complicated Matrix Plans and Delivery Options

6


• Interest Sensitive Whole Life

• Universal Life

• Individual Term

• Critical Illness

• Accident Insurance

• Cancer Insurance

• Hospital Indemnity

• Individual STD

• Individual LTD

• “Hybrid” (Acc, CI, Perm Life)

• Group Supplemental Term

• Group Auto/Home Insurance

• Group Critical Illness

• Group Disability

• Group Long Term Care

• Legal

• Financial Planning

• Vision

• Dental

• Identity Theft

• Discount Malls

• Limited Medical Plans

Voluntary Plans / Products

“W

ork

sit

e” P

lan

s

“P

latf

orm

” P

lan

s

• Aflac

• Colonial

• Unum

• Trustmark

• Guardian

• ING

• AIG

• Colonial

• Allstate

• Transamerica

• Lincoln Financial

• Prudential

• Humana

• UHC

• Aetna (Allstate)

• AIG

• MetLife

• Unum

• Aetna

• MetLife

• Travelers

• CNA

• Aetna

• Liberty

• ARAG

• AYCO

• Cigna

• Hyatt Legal

• The Hartford

• Prudential

• VPI

• VSP

“Worksite” Carriers

Representative Carriers

“Platform” Carriers

• Metlife

• Beneplace

• YouDecide

• Motivano

• Marsh

• Perkspot

• Empowered

Or employer-to-carrier direct

• Univers

• EOI

• BCI

• BenefitVision

• Hodges Mace

• Farmington

• Winston Financial

“Worksite” Enrollment Firms

VB Outsourcers (Examples)

“Platform” VBO’s

Employer’s enrollment system

Commission Structure of Voluntary Plans Employer Be Aware, not Beware

7

* Illustration of Voluntary Benefit Commission

** You can remove all commissions from most “Platform” plans

0%

20%

40%

60%

80%

Yr 1 Yr 2 Yr 3

Commission as a Percent of Policy Premium Dollars * Year 1 through Year 5

100%

Yr 4 Yr 5

Too Good To Be True??

Front-loaded commissions can

provide permissible subsidies for

services that support the more

strategic initiatives through:

• Communications

• Consulting

• Administration

Co

mm

iss

ion

% o

f P

rem

ium

Pro-active Plan Commissions

(Worksite Products)

Re-active Plan Commissions

(Platform Products)**


Employer Financial Impact of Voluntary Plans The Possibilities

8

The ‘What’ The ‘How’ Plan

Type

$ Impact

Raise

Retention

Lower

Expenses

1 More aggressive med plan cost shifting Filling gaps with voluntary plans WS YES YES

2 Launching voluntary plans through your

major med carrier

Carriers offer rate concessions on core

plans WS YES

3 Increase ‘favored’ health plan participation Soften the perceived ‘blow’ of high-

deductible plans with VBs WS YES YES

4 Subsidize communications, consulting or

admin costs

Permissible redistribution of VB

commissions WS YES

5 Stronger retention through selected

voluntary plans Measure success with participation

WS/

PF YES

Legend:

WS – Worksite or Hybrid Plans

PF – Platform Plans


Medical Plan ‘Remodeling’ to Save Money

9

What

• Reducing cost through more aggressive plan modifications

- Stronger cost-shifting or cost sharing to reduce employer plan costs through

higher deductibles, co-pays and coinsurance, etc.

- Most specifically in health plans, but can apply to Disability as well

How

• Filling the financial exposure gaps with supplemental health plans

- Indemnity, schedule-based, lump sump benefits for medical evens, paid directly to

employee

- Most voluntary plans are not coordinated with the health plan (exception Aetna &

UHC plans)

- Sometimes employee perception is that they have equal or better coverage, even

though the employer-paid plan coverage has been reduced

Buck Voluntary Benefits Integrated Solutions (VBIS) 1 2 3 4 5

Medical Plan Remodeling With Supplemental Medical Illustrative Example Only

1 2 3 4 5 Buck Voluntary Benefits Integrated Solutions (VBIS)

10

Integrating Supplemental Health Plans

11

Employee or

Employer

Paid

Critical illness plan

Accident plan

Hospital indemnity

Lower Employer Health Care Cost

VB Supp.

Health

Plan

“Buffers”

Create more aggressive plan changes (shifting cost)


Increased employee deductible and coinsurance cost

1 2 3 4 5

Redefining Voluntary Plan Replacement

12

The Old: Silos of Benefit Delivery

Worksite VB Benefits Platform VB Benefits Annual Core Enrollment

The New: Integrating the Plan Placement and Decision Process

Annual Core Enrollment


Benefits administration

enrollment system

Enrolled through carrier or

enrollment firm

Aggregated through a VBO or

employer links to carrier system

1 2 3 4 5

Saving Money on Core Health Plans

13

What

• Major medical carriers are getting into the VB business

- Primarily viewed as supplemental medical plans, like Critical Illness, Accident

or Hospital Indemnity – plan designs mirrored after worksite supplemental

medical plans

- Aetna (through Allstate), UHC, Humana

How

• Filling the financial exposure gaps with supplemental health plans

- Agreeing to offer their ‘supplemental medical’ plans may avail an employer to

provide concessions on the core medical plan

- Some are coordinated, some are not – depends on the carrier

- Usually the carrier will require an ‘active’ enrollment environment to secure

core plan concessions – they are after participation in the supplemental

medical plans, but so are you


Increasing Participation in ‘Favored’ Health Plans

14

What

• Integrating the supplemental medical plan delivery assists with the decision

process

• Plan placement and communication strategy establishes medical and

supplemental medical plans as a package

How

• Critical Illness, Accident or Hospital Indemnity plans fit well with HD plans,

offering additional financial security within the perceived ‘unknowns’ of HD

plans

• Requires an appropriate medical plan contribution strategy

• Possible to bundle the contribution of the major medical with the supplemental

medical into a single plan decision


Creating “Positive Plan Selection”

15


Subsidizing Employer Fees Through VB

16

What

• Reducing or subsidizing employer plan expenses through voluntary plan

commission redistribution, potentially funding H&W:

- Communication expenses

- Consulting expenses

- Administration expenses

How

• Usually requires “pro-actively” enrolled voluntary benefits with front-loaded

commission structure, but some plan commissions can be levelled out

• Usually requires acceptance/waiver of voluntary plan(s) with certain percent

of employee population

• Must follow both ERISA and state insurance guidelines for permissible

services


Reduced Turnover with Stronger Communications

17

Do the math:

– assuming cost of turnover ~ 30% of salary

– Average salary of $35,000

– Cost of losing 1 employee = $10,500

– 5,000 group x 5% impact = 250 ees

Savings from 5% retention = $2,625,000

Poor

Communications

Strong

Communications

Weaker Plans

Benefits BELOW Industry Benchmark

Better Plans

ABOVE Benchmark

Decre

ased

Tu

rno

ver

5% lower turnover better communications, NOT

better plans

De

cre

as

ed

Tu

rno

ve

r

Lower

Employee

Turnover

Higher

Employee

Turnover Lowest

Employee

Turnover

17%

12%

8%

Watson and Wyatt – 2004 Study


Linking Employee Communications to Company Financial

Performance

18

What

• Communications are crucial, more so now than ever, but expensive

- 85% agreed that one of their biggest challenges is getting employees to understand

their benefits.*

- Over 75% agreed that a well communicated benefits program leads to reduced

turnover.*

- 65% stated they do not have the HR staff to effectively communicate the benefits.*

“Companies that are highly effective

communicators had 47% higher total returns to

shareholders over the last five years compared

with firms that have the least effective

communications.”

“Effective employee

communications is a leading

indicator of financial

performance and a driver of

employee engagement.”

According to the Towers Watson, 2009 / 2010 Communication ROI Study Report

* Source: “Benefits 101: Would Your Employees Pass the Course?” 3007


Impacting Retention through VB Offering Isn’t Enough

19

What

• Back to original premise – How effective are the voluntary plans in attracting

and retaining the employee, beyond the pay check?

1. Improving employees’ overall financial security?

2. Providing savings opportunities only available through their employer?

3. Making their lives a bit easier in some way?

4. Impacting employees’ perception of why they should work there?


How

• “Eye-candy” vs. creating true employer-employee affinity

- If the employee is not participating in the voluntary plan, the answer to questions

1-3 is NO

- If they see that it is offered, the answer to question 4 may be YES, but if the plans

are not used, the reaction may not be sustainable

- ‘Eye-candy’ may help attract employees in comparing job opportunities, but will not

help retain the employee, unless they are using the plan

1 2 3 4 5

Employer Financial Impact of Voluntary Plans The Possibilities

20

The ‘What’ The ‘How’ Plan

Type

$ Impact

Raise

Retention

Lower

Expenses

1 More aggressive med plan cost shifting Filling gaps with voluntary plans WS YES YES

2 Launching voluntary plans through your

major med carrier

Carriers offer rate concessions on core

plans WS YES

3 Increase ‘favored’ health plan participation Soften the perceived ‘blow’ of high-

deductible plans with VBs WS YES YES

4 Subsidize communications, consulting or

admin costs

Permissible redistribution of VB

commissions WS YES

5 Stronger retention through selected

voluntary plans Measure success with participation

WS/

PF YES

Legend:

WS – Worksite or Hybrid Plans

PF – Platform Plans


VBIS Objectives

21

• Objective #1: Overarching employee focus – complement and enhance plan

design and delivery to attract and retain talent

• Objective # 2: Strategic employer focus – lower overall benefit spend, while

adhering to Objective #1


VBIS Mission Statement

To ensure and maintain our presence as the nation’s preeminent Voluntary

Benefit practice by:

• Responsibly and creatively crafting employer Voluntary Benefit solutions

that support our clients’ overall benefit and corporate objectives

• Maintaining the highest level of business integrity with full disclosure

• Focusing on long-term, sustainable relationships with our clients

• Working to support the financial well-being of our employer clients and their

employees

Questions

Amy Hollis

National Practice Leader, VBIS

[email protected]

770.403.8777

Jim Lowder

Director, Health and Productivity

[email protected]

312.846.3363

22


Wa vbis-2012-0508

Business

voluntary plans ws

yeslaunching voluntary

deductible plans

benefit expense talent

financial security talent

financial wellbeing

employer clients

hybrid planspf platform