Employer-Sponsored Healthcare Outlook

Agenda State of Employer healthcare Insurance trends Compliance snapshot Technology outlook Recap

State of Employer Healthcare A shifting landscape Healthcare Cost Community Rating Funding Narrow Network / ACO Compliance ERISA ACA ER Reporting Technology Ben Admin Private Exchange Payroll/HRIS

Employer Sponsored Health Insurance ACA is here to stay –Community rating for groups w/less than 100 employees Winners and Losers Reduced choice/freedom No room for negotiation on cost No reward for risk management

Employer Sponsored Health Insurance Carrier – Aetna/Humana – Anthem/Cigna – American “Socialized” Medicine Broker – Record Consolidation – New Landscape – Death of mom/pop Consolidation

Employer Sponsored Health Insurance Future of Employer-sponsored healthcare –Seeing a massive migration from fully-insured to self-insured arrangements ASO Captive –Employers relying more on technology Reporting requirements Managing education/communication to support employee self- service options –Network Compression

Why the Self-Insured Migration? Mercer 2011 National Survey of Employer-Sponsored Health Plans

Funding Level Risk Comparison Fully Insured Level Funded Captive Cost Plus Reference Based Pricing ASO

3 Primary Self-Insured Options –Traditional – ASO (administrative services only) More risk – stand on your own two feet Purchase claims administrator and stop loss –Level Funding Self-insured plan with fully-insured premium (manual rating does apply) One carrier/TPA/stop-loss –Captive Self-insured for a portion of risk Share in remaining risk with other captive members

Captive Health Insurance Catastrophic Insurance & Program Expenses Captive Layer Self-Insured Layer Captive Limit $300,000 Specific Stop Loss (e.g., $25,000 Unlimited Per Claim Frequency Aggregate Stop Loss Group Stop Loss

ACA Form 1094/1095 ER Notices/Disclosures Variable Hour Tracking Play or Pay Minimum Value/Essential Benefit PCORI/Transitional Reinsurance ERISA Form 5500 Discrimination Testing Wrap Document ER Notices/Disclosures

Technology Tremendous Growth in Healthcare Segment Pricing transparency Ben Admin/Private Exchange Payroll/HRIS Employer Reporting

Private Exchange What is an exchange? Term appears in health care reform Variation of ben admin platform Could be more than one vendor/carrier There are many types of exchanges! –Public Marketplace (ACA – federal or state-based) –Employer sponsored private exchange –Individual private exchange

Private Exchange Private exchange (potential benefits): For Employers  Packaged approach  Administrative efficiency  Defined Contribution  For Employees  Select benefits package that meets their needs  Enrollment efficiency & simplicity  Decision Support

Technology One certainty in an uncertain market: Tech = glue to broken system –ER’s must automate processes Payroll Ben Admin Reporting Which glue is the right glue?

Recap Healthcare landscape is shifting rapidly Community rating driving self-funded migration Carrier consolidation = America’s version of “socialized healthcare” Compliance becoming large burden for employers Lines blurred for technology vendors and solutions

Recommendations Review current technology (payroll, hris, ben admin) Who owns the compliance burden? Review health insurance strategy –Funding arrangement? –Best in breed or like everyone else? –Must have pro-active multi-year strategy

The Crichton Group 3011 Armory Drive Suite 250 Nashville, TN Austin Madison Vice President P Questions?