How to Use Voluntary Benefits to Reduce Your Benefit Costs Pressure Jay Hutchins Vice President Broker Marketing & Sales

Costs continue to rise Sources: Kaiser Family Foundation and Health Research & Educational Trust, “Employer Health Benefits,” 2009; Hewitt Associates, “U.S. Health Care Cost Rate Increases Reach Highest Levels in Five Years, According to New Data” Health insurance premiums for family coverage up 131% in past decade Average cost of group health coverage expected to rise 8.8% from 2010 to 2011* Smallest employers pay 18% more for health plans

Competitive benefits are critical Source: LIMRA: Navigating the Employee Benefits Marketplace, % 59% 52% 49% 42% 38% Most important factors when considering a new job with comparable salary

4 keys to benefits cost control Redesign Utilization Eligibility Wellness

Benefits Plan Redesign

Employers respond to rising costs Absorb rate increase at renewal Shift more contribution to Employee Direct impact to employer’s bottom line Shift more contributions to employees Direct impact to employee’s pocket book Redesign with high- deductible health plan Increases employee’s out-of-pocket exposure

Expenses covered by health plan Current plan Employee out-of-pocket costs Expenses covered by health plan Employee out-of-pocket costs New plan Source: National consumer study, Financial Industry Regulatory Authority Investor Education Foundation in consultation with the U.S. Department of Treasury and President’s Advisory Council on Financial Literacy, 2009.

● Employer saves money by redesigning health plan ● Employees receive benefits to help pay out- of-pocket costs from a hospital confinement or other covered health care event Medical gap coverage Employee out-of-pocket costs Expenses covered by health plan Voluntary solution

Types of voluntary benefits Supplemental health Accident Disability Life Critical illness and cancer

Employers value voluntary benefits Source: Ron Neyer, “The Voluntary Benefits Report Card,” LIMRA International, 2007

Common misconceptions Administration is too complex Employees aren’t interested Enrollment takes too much time Designed for large corporations

Workers value voluntary benefits Flexibility in using claim payments Portability Stable coverage and premiums More lenient underwriting Convenient payment

Utilization

Benefits understanding is critical Source: Colonial Life, SHRM national conference survey, June % Importance 21% 5% 74% Level of Knowledge

Human resources challenges Source: Colonial Life & Accident Insurance Company, “Colonial Target Model and Larger Case Research,” May 2008

Employers agree 1-to-1 communication works 3% 91% No Yes Source: Colonial Life, SHRM national conference survey, June 2008

Employees say 1-to-1 works Not important Very important Source: Colonial Life post-enrollment surveys, Jan.-Dec Important Value of Meeting Significantly improved Not improved Improved Benefits Understanding

Eligibility

Dependent verification Source: Continuous Health company records Dependents in Plan Estimated Ineligible5% Average Annual Cost per Dependent $1,900 Potential Savings per Year$9,500$47,500

Benefits of dependent verification Efficient process in 1-1 enrollments High return on investment Clear communication Prevent claims problems

Wellness

Wellness programs Exercise Smoking cessation Online health assessments Onsite health screenings Telephone nurse line

4 keys to benefits cost control Redesign Utilization Eligibility Wellness

Questions?