Defined Contribution Strategies Using
Private Exchanges
A Case Study
Barbara M. Watters
Vice President, Human Resources
February 21, 2013
Factory Motor Parts Company
 A multi-generational family business founded in 1945.
 Grown organically and through acquisitions from 1 location in
Minneapolis, MN to 104 in 21 States.
 Ford and GM’s largest wholesale distributor of aftermarket
Original Equipment (OEM) parts
 Serving the Mid-west, Mountain, West including Alaska and
Southwest regions along with select products in other
markets and overseas.
“A Forever Company”
- 35 Location in 2001
- 104 Locations in 2012
Over 2,000,000 sq ft of Warehouse
700 + Delivery Vehicles
400 + Sales Professionals
A Growth Implication for Human Resources:
Need Competitive Rewards Strategy
Recruit, Attract and Retain
Our Challenges:
• Industry with thin margins
• Wage & Benefit Cost Control Critical
•Competition = Large Public Employers
• Competitive Variations in hire markets
• Attractiveness ? -Had 1 HD plan design
BUT
Keep Costs and
ROI
Additional Challenges
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Leadership Team –The Message: Provides cost predictability
with EE satisfaction & market competitiveness.
Communications – 2000 employees/21 States
Employee Diversity- Age, Ethnicity, language, geography,
education, experience, incomes.
Limited Computer Access – or familiarity
Lack of Education/Experience- Little knowledge of plan
designs; no experience with choices. Outside support
CRITICAL.
Cumbersome Enrollment Process- (paper & automated)
Structuring ER Contribution- To be competitive but not cause
large migration.
Solution ? A Defined Contribution Strategy in 2012
Predictable Spend for Company …. full suite of Competitive Plan
Options and costs for my employees !
 Chose from 10 Plans on exchange with an array of plan designs.
 Chose 3 employer contribution levels – EE/EE+1/Family with
careful consideration to minimizing employee migration to Plan.
 Self-insured to fully insured for inaugural year; more built-in
benefits
 Minimal disruption of existing providers with change in
networks; overall increase in provider network nationally.
 Opportunity to reduce employer spend by 8-12%
2012 Defined Contribution StrategyThe Results
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No organic increase in enrollment or level of choice
Employer spend reduced
Employee visibility to spend – seen as “additional pay”.
EE’s very positive to having choices that fit them!
EE’s saw better options for them at less cost than HD Plan.
Attractive to recruits; + retention effect.
Enrollment: 68% Web Tool
32% Call Center
EE increased
satisfaction with
Medica provider
networks & service in many
geographic areas.
Year 2: 2013 Defined Contribution Strategy
• Made Voluntary Increase in employer contribution/spend
of 8.5%.
• Plan designs remained constant – EE’s very happy with the
choices.
• Added Medica’s Choice Passport ACO network of
providers as option for 11-county Twin Cities’ Metro area.
• Changed HRIS and implemented its’ benefit on-line
enrollment functionality. Medica Customer Call Center for
plan enrollment support was big plus.
Defined Contribution Strategy with My Plan by Medica
Conclusion
Predictable Spend
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Cost Savings
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Administrative Support •
Employee Satisfaction
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Flat $ fixed cost for health spend per EE
Ability to offer competitive choices to EE’s and
recruits with no administrative hassles.
10% cost decrease in 2012 vs. 2011 with
increase in benefits.
Positioned for spend control going forward.
Dedicated Call Center & web decision tools
that provide EE’s an unbiased, user friendly
experience - thus minimizing my HR staff time.
Popular Health Plan Options for all EE types,
regardless of location. ACO definite +
Medica/UHC network - a value -add nationally
EE’s can choose by purse and individual needs
EE’s appreciated the transparency , support &
the empowerment of choice.