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Private Exchanges: Four Years Later

Joe Harten, CEBSPartnerMercer

Cincinnati, Ohio

Sandra WinkleHR Director

North American Properties, Inc.Cincinnati, Ohio

Mark BishopSenior Vice President,

Associate and Organizational EffectivenessTerumo BCT

Lakewood, Colorado

4A-1

A G E N D A A N D S P E A K E R S

1

2

3

4

EVOLUTION OF PRIVATE EXCHANGES

EXCHANGE JOURNEY: TERUMO BCT

EXCHANGE JOURNEY: NORTH AMERICAN PROPERTIES

QUESTIONS

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• A private exchange is an employer-sponsored benefit plan Offering multiple benefit options That uses innovative technology and decision support tools and resources To deliver a satisfying experience to plan members

• A private exchange is not: Part of the public exchange offerings under the Affordable Care Act An employer healthcare benefit exit strategy A pooling, risk-sharing, or association arrangement with other employers An employee leasing approach

W H AT I S A P R I VAT E E X C H A N G E ?

4A-3

F I V E T R E N D S T H AT E X C H A N G E S C A N A D D R E S S

BROAD REGULATORY CHANGES

PAYOR & PROVIDER CONSOLIDATION

CONSUMER EMPOWERMENT

MULTI-GENERATIONAL WORKFORCE

TECHNOLOGY & DATA EXPLOSION

G R E A T E R D I V E R S I T Y

H I G H E R C O S T S

G R E A T E R C O M P L E X I T Y

M O R E A C C O U N T A B I L I T Y

M O R E S E L F - S E R V I C E

G R E A T E R P L A N C H O I C E

M A R K E T L E V E R A G E

I N T E G R A T E D C O M P L I A N C E

S E R V I C E S

D E C I S I O N S U P P O R T T O O L S

A G I L E & E V E R E X P A N D I N G P L A T F O R M

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• Precise statistics are hard to come by, but Accenture estimated that approximately 8 million people were covered by private exchange programs in 2016

• Early growth estimates (40 million members by 2018) were overstated, but Mercer survey data shows that employers are still interested

P R I VAT E E X C H A N G E E N R O L L M E N T T R A J E C T O R Y

4A-5

E X C H A N G E PA R T I C I PA N T S E L E C T H D H P SM O R E F R E Q U E N T LY

S o u r c e : 2 0 1 7 M e r c e r M a r k e t p l a c e 3 6 5 E n r o l l m e n t R e s u l t s

• 57% of employees are enrolling in a CDHP option

• 75% of enrollment is split evenly across the most prevalent options available ($800/$900, $1,500/$1,850 and $2,500/$2,850)

• Enrollment in the $4,500 and $6,550 options has increased from 4% in 2016 to 7% in 2017 as the option is offered to more employees

$0 Deductible, 4%

$350/$400 Deductible,

15%

$800/$900 Deductible,

24%$1,500/$1,850 Deductible,

26%

$2,500/$2,850 Deductible,

24%

$4,500 Deductible, 4%

$6,550 Deductible, 3%

MEDICAL PLAN ELECTED

4A-6

North American Properties

• Founded in 1954

• Privately held, Multi-Regional Real Estate operating company

• Headquartered in Cincinnati

• Offices in Atlanta, Dallas and Fort Myers

4A-7

North American Properties

63 Years acquired, developed, or developing:

• 169 projects• In 67 cities, in 15 states

• 19,600 units residential

• 22 million square feet commercial

• 38 properties managed or in development

• 12 projects in the pipeline

4A-8

Employee Demographics

250A S S O C I A T E S

$ 8 0 , 3 9 4ANNUAL INCOME

3 5 %DEPENDENTS

O H / G ARESIDENCE

4 1AGE

5 1 % M A L EGENDER

I N D U S T R Y T O P S T A T E S

3 2 %G A

A G E B R E A K D O W N

4 1 % M I L L E N N I A L S

3 0 % G E N X

2 9 % B O O M E R S8%

30%22% 21% 18%

1%

LESS THAN 25

25–34 35–44 45–54 55–64 65+

R E A L E S T A T E

3 4 %O H

26%

12%

13%

7%

10%

5%

5%

14%

8%

Less than $39,999

$40,000–$49,999

$50,000–$59,999

$60,000–$69,999

$70,000–$79,999

$80,000–$89,999

$90,000–$99,999

$100,000–$149,999

More than $150,000

I N C O M E B R E A K D O W N

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Evolution to a Private Exchange

2007• Introduced options (HDHP, PPO)

• Financial crisis had a major impact

4A-10

Evolution to a Private Exchange

2010

• Removed PPO

• Growth in projects

• Doubled in associates

4A-11

Evolution to a Private Exchange

2015• Introduced MMx

• Continued growth

4A-12

Why a Private Exchange ?

More Options

More Options

Improved Administration

Improved Administration

Cost Effective

Cost Effective

Mercer Marketplace (MMx)Mercer Marketplace (MMx)

4A-13

Initial Benefit Options

2015

• Three medical options:

$350 deductible PPO (11% enrollment)

$1,500 deductible HDHP (21% enrollment)

$2,500 deductible HDHP (68% enrollment)

• Dental (51% enrolled) and Vision

• Expanded life insurance choices

• Ancillary health benefits (hospital indemnity, critical illness, accident)

• Voluntary benefits—ID theft, legal coverage, pet insurance and auto/home

4A-14

Associate Comments

“I absolutely loved this year’s open enrollment experience! The website was informative and it was easy to

use. Thanks for adding dental!”

“I am now enrolled. Process was easier than advertised: 30 minutes +/-.”

“I am now enrolled. Process was easier than advertised: 30 minutes +/-.”

“I did this yesterday. Loved the online

process. Very user friendly!”

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Lessons Learned

There are no secrets to success. It is the result of preparation, hard work, and learning from failure.

~ Colin Powell

4A-16

Lessons Learned

Be Positive, Patient, and Proactive

Be Realistic with Duties

Educate, Educate, EducateChange is Good

Responsible for the Exchange

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Future Strategies

2018

• MMx continues to align

• Continue to monitor premiums

• Educate and communicate

4A-18

Finally . . .

As with any rewards initiative, always consider your—

• Values and strategy

• Relationships with consultants and vendors

4A-19

C O M P A N Y P R O F I L E

Established: In 1964 as COBE Laboratories

Number of Associates: Over 6,000 in 36 countries

Global Headquarters: Lakewood, Colorado

Manufacturing Facilities:

Belgium, India, Japan, Northern Ireland, United States, Vietnam

Main Business:

A global leader in blood component, therapeutic apheresis and cellular technologies, and the only company with the unique combination of apheresis collections, manual and automated whole blood processing, and pathogen reduction.

Parent Company: Terumo Corporation; Tokyo Stock Exchange (4543)

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One company, three businesses, eleven product lines

G L O B A L M A R K E T L E A D E R P O S I T I O N

Therapeutic Systems Cell Processing

Delivering higher economic

and clinical value with strategic supply

chain solutions

Advancing blood therapies to bring more treatment

options to patients

Enabling cellular therapies that may

fundamentally improve outcomes

Blood Centers

4A-21

2,361E M P L O Y E E S

42%

8%

6%

6%

7%

5%

6%

17%

4%

Less than $39,999

$40,000–$49,999

$50,000–$59,999

$60,000–$69,999

$70,000–$79,999

$80,000–$89,999

$90,000–$99,999

$100,000–$149,999

More than $150,000

I N C O M E B R E A K D O W N

$ 6 7 , 5 0 2annual income

7 Y E A R Stenure

C Oresidence

4 3age

5 6 % M A L Egender

I N D U S T R Y T O P S T A T E S

9 6 %C O L O R A D OA G E B R E A K D O W N

3 6 % M I L L E N N I A L S

3 6 % G E N X

2 7 % B O O M E R S

6%

26% 24% 24% 18%3%

LESS THAN 25

25–34 35–44 45–54 55–64 65–74+

M A N U F A C T U R I N G

T E R U M O B C T D E M O G R A P H I C S O F U . S . E N R O L L E E S

4A-22

Pre 2010 2010-2014

• Multiple medical vendors• Many supplemental options• CDHP with HRA• Wellness programs

introduced• Ownership changes

A D M I N I S T R A T I O N & M A N A G E M E N T

• 2 Medical vendors, 4 medical plans

• Switch to HSA from HRA• Clunky enrollment• Minimal migration • Wellness programs enhanced

I N C R E A S I N G C O S T S

E V O L U T I O N O F B E N E F I T S A T T E R U M O B C T

4A-23

• Five medical options across two vendors (CIGNA and Kaiser)• $0 deductible HMO—Kaiser only• $350 deductible PPO• $800 deductible PPO• $1,500 deductible HDHP w HSA• $2,500 deductible HDHP w HSA

• Two dental plans and two vision plans

• Company-paid basic life, AD&D, and disability

• Optional buy-up for additional life, AD&D and permanent life insurance

• Ancillary health benefits (hospital indemnity, critical illness, accident)

• Voluntary benefits

I N I T I A L B E N E F I T O P T I O N S

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W H Y D I D W E M O V E T O A N E X C H A N G E ?

Cost Savings

User Experience

Ease of Administration

Plan Design

4A-25

H O W W A S T H E M O V E ?

User Experience• Modern enrollment website• Call center with expanded hours• Nine medical choices• Larger menu of ancillary product offering

Administrative Ease• Wellness discount administration• Enrollment feeds to vendors• Integration to payroll

Plan Design• Standardized plan designs• Streamlined compliance

Cost Savings• $809k in first year • $5.6 million over five years• Trend migration, savings from

collective purchasing, and reduced internal support

4A-26

M A R K E T P L A C E I M P A C T

27%

25%

44%

4%

2014 ENROLLMENT MIGRATION

29%

21%16%

18%

16%

2015

HMO $350 Ded $800 Ded $1500 Ded Other

Kaiser

Cigna

M I G R A T I O N

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I M P R O V E M E N T S A N D P L A N S

20172018…

• Expanded wellness programs to include coaching and additional financial wellness

• Continued management of pharmacy

• Introducing spousal surcharge• Competitive bidding for all plans• Considering elimination of one plan• Continued pharmacy management

4A-28

• Plan, well in advance and very thoroughly• Change management and communication are

critical • Get ahead of key stakeholders early and keep

them informed• Leverage tools and information to ease concerns • Emphasize making good choices

L E S S O N S L E A R N E D

4A-29

T H O U G H T S F O R T H E F U T U R E

Private Exchanges will continue to grow in popularity

Rationale will continue to shift from cost savings to choice and administrative ease

Growth in jumbo market limited to certain industries—many can achieve similar

outcomes already

Ideal for introduction of new concepts (ACOs, narrow network, emerging voluntary benefits)

Optimal opportunity for small and mid sized employers to access best in class technology

and services/prices

CONTINUED MARKET

EVOLUTION

4A-30

THANK YOU!

QUESTIONS?

4A-31