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 • • • • • • • 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 • • • • • • • • 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 • • • Cost Savings • Administrative Support • Employee Satisfaction • • • • 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.