The Road to Exchange
Solutions - Delivering
Sustainable Value for All Your
Employee Populations
Janet Vermeulen, Senior Consultant, Towers Watson
Rebecca Duff-Campbell, Communication & Change
Management Consultant, Towers Watson
Health Care Benefits Continue to be Highly Valued
Health care benefits are an important driver — in the top 10 —
of employee attraction, globally and in the U.S.*
98%
95%
57%
U.S. employers committed to offering health care programs to
full-time employees in 2015 or after**
U.S employers that say subsidized health care is an important
part of their value proposition for full-time employees†
U.S. employers that say private health exchanges could be a
viable option in 2015 or after**
* Towers Watson, 2012 Global Workforce Study.
** Towers Watson, 2013 Health Care Changes Ahead Survey.
† 2014 Towers Watson/National Business Group on Health Employer Survey on the Value of Purchasing Health Care.
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Excise Tax Impact:
Must Stay Between the “Floor and Ceiling” of Costs to Avoid the
Levy
2018
40% Excise Tax Cap Ceiling ($10,200/$27,500)

Lower the gross costs of the plan (i.e., average claims and
administrative expenses per employee), and the rate at which those
costs increase



Reduce benefit plan value (increase employee costs through higher
deductibles, coinsurance or copays)
Lower trend through use of wellness programs, disease
management programs, incentives and penalties
Consider reductions in dependent subsidies
Consider “pay” strategy and direct employees to Exchanges
Introduce new wellness programs, giving employees tools and
resources to maintain and improve their health. This minimizes the
long-term health care trend
 Healthier employees mean fewer and smaller (medical &
prescription drug) claims, leading to lower budget rates
 Lower budget rates extend the period of time before an employer
hits the excise tax thresholds


2014
Plan value low enough
to avoid the excise tax
Minimum plan of 60% actuarial value and
affordable to employees






Manage cost trend
Improve workforce
health
Reduce risk factors
Optimize vendor
performance
Manage high-cost
claim risk
Minimize corebenefits
Plan design high
enough to avoid
penalties
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Health Care Delivery New Opportunities
Employer Objectives



Affordability
and Excise
Tax Risk
Total Rewards
EVP
Financial commitments
External Influences



PPACA
Competitive needs
Delivery alternatives
Components that drive
lower cost/high value
Benefit
Delivery Channel
Optimization
Benefit
Restructuring
Network
Optimization
and Contracting
Population Health
and Health Care
Accountability
and Engagement
Health Care Reform is leading to significant changes in the health care
system as well as potentially how benefits are delivered
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Three Paths to Delivering Health Care Benefits
1. Build
Manage performance on own: likely
through added employee OOP costs,
investing in aggressive care/condition
management and health improvement
Excise tax
avoidance
and trend
management
Employer
Managed
2. Buy
Private exchange path: sustainable
high-performing product leveraging
best-practice solutions
Exchange
Managed
3. Exit
Exit with subsidy or pure exit: pay $2,000
penalty (less first 30) — deal with loss of
family subsidy
Employee
Managed
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The Changing Plan Sponsor Mindset:
Self-Managed vs. Exchange-Based
Strategic
Decision
Points
Control of
plan design
Vendor
management
Build
Employer Managed
Private
Buy
Exchange Managed
Public
Exit
Employee Managed

Employer has
complete ability to
customize

Exchange operator
designs plans for
optimal value

Oversight agency
dictates standard
designs

Employer initiated
design changes likely
to be needed on a
regular basis

Plan updates are
responsibility of
exchange owner

Inconsistent
application of design
levers across states

Employer is
responsible for
selection and
management of health
plan and carve-out
vendors

Exchange operator
selects, contracts
and manages
vendor network

Oversight agency
selects, and may
negotiate rates with,
insurers
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The Changing Plan Sponsor Mindset:
Self-Managed vs. Exchange-Based (continued)
Strategic
Decision
Points
Financing
approach
Participant
experience
Build
Employer Managed

Employer likely to self
insure, retaining risk of
one-year cost
fluctuations
Private
Buy
Exchange Managed

Employer may
choose to self insure
or fully insure

Contribution
structure is equal
dollar — and can
shift all risk to
participants
Public
Exit
Employee Managed

All plans fully
insured

Limited risk
mitigation for
insurers from TRF
pool and elsewhere

Contribution strategy
can be equal dollar,
equal percentage or
other approach

Employer directed

Exchange directed


Likely limited variation
by geographic location

Geographic rate
differentiation
Exchange
influenced

Geographic rate and
design differentiation
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The Changing Plan Sponsor Mindset:
Self-Managed vs. Exchange-Based (continued)
Strategic
Decision
Points
Build
Employer Managed
Private
Buy
Exchange Managed
Public
Exit
Employee Managed
Source of
premium
funding

Employer and
employee dollars used
to pay premiums

Employer and
employee dollars
used to pay
premiums

Federal subsidies
and enrollee dollars
used to pay
premiums
Tax
efficiency

Employer costs: tax
deductible

Employer costs: tax
deductible

Employer: penalties
not deductible

Employee: tax-free
employer subsidies
and pre-tax premiums;
some out-of-pocket
costs may be tax free

Employee: tax-free
employer subsidies
and pre-tax
premiums; some
out-of-pocket costs
may be tax free

Employee: After-tax
premiums and outof-pocket costs
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What Employers are Moving to Private Exchanges?
Employer
Description
Financially
Inefficient/
Challenged
Resource
constrained
Execution
“Fatigue”
Attributes

High health plan costs

Limited health optimization

Desired End State

Lower-cost, more efficient
health plans
Corporate financial limitations

Savings accrue to employer

Moderately successful status
quo


Lack of leadership, staffing
and/or operational commitment
Improved health plan
financial performance with
outsourced administration

Plan savings pay for
outsourcing plus provide
some employer relief

Maintenance of financial
efficiency and health focus

Ability to reallocate employer
assets while streamlining
oversight and management


Highly successful status quo
but with extensive resource
demand
Other HR/benefits priorities
requiring attention
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How Do You Evaluate Private Exchanges?
Who saves?
Is it viable long term?
Are cost reductions the
What is the impact of excise
result of cost-shifting,
taxes and how does the
improved risk pools,
exchange plan to avoid
operational efficiencies?
them? What is the expected
Do employers or participants
trend rate in the plans?
or both receive the
“When you’ve
savings?
seen one
exchange,
How is the participant you’ve seen
What is the
experience realized? one exchange” exchange’s strategic
What decision support
direction?
tools, modeling tools and
Is it focused on health
call center support options
optimization, risk shifting,
are available to participants?
consumer experience/
Who owns/provides these
buy downs, or other
services?
approaches?
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Towers Watson’s OneExchange
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OneExchange: Solutions for All Populations
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Sustainability: Optimizing Health
Care Plan Management
Key Features of OneExchange Active

Provide high-performing designs that
promote consumer behavior, and healthy
lifestyle through wellness, care
management and engagement

Take advantage of best in class pricing
and vendor management (including
access to voluntary benefits)

Support team members with guided
enrollment and compelling multimedia
communications to the new programs

Access to complete benefits
administration and full spectrum of
ongoing program management support
Health Plan
Management
Benefits
Administration
Communication
and Change
Management
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OneExchange: 2014 Active Exchange Model
Consumer-guided
enrollment
experience
High-value design elements
Wellness, care/Rx management, transparency and more
Self-funded plans in 2014
BenefitConnect
enrollment and
ongoing
administration
platform
Four health plan choices
Dental and vision plan choices
Top carriers in 50 states and Puerto Rico
Premiums configured across 40 geographic rating areas
The goal: Deliver a high-value, sustainable framework built on four key pillars
Incentives/disincentives
to leverage improved health
behaviors and decisions
Best-in-market
care and condition
management protocols
Consumerism tools
and point-of-care
decision support
Long-term
financial viability
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Employee Experience & Perspective
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Employee Experience
3. Exit
Completely self-reliant to understand
plans, personal and financial impact;
responsibility to be a good health care
consumer and adopting wellness
Employee
Managed
2. Buy
Level of
Change
Intensity
Increases
Understanding of new plans new
concepts; increased responsibility in
selecting plans; responsibility to be a
good health care consumer and adopting
wellness programs
Exchange
Managed
1. Build
Increased responsibility to be a good
health care consumer and adopting
wellness programs, and also
accountability
Employer
Managed
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OneExchange Active Communication Overview
1
2
Announce
3
Educate
4
Enroll
Support
What colleagues and their families will need to know
July – August

Why the company
is taking this path

What it means for you and
your family


What education and
support you can expect in
the weeks and months
ahead
Where you can go if you
have questions
August – September

An overview of health
care benefit basics and
key terms

An introduction to your
health plan choices for
upcoming plan year

October – November

What you need to do as
you prepare to enroll

How to evaluate your
choices and match them
up with your needs

The financial support the
company will provide and
a focus on your benefits
and costs

Where to go when you’re
ready to enroll
What happens after you
enroll
December – into next year

What the company will do
to support your ongoing
health and wellbeing

What support is available
from your health plan
vendor

How to make the most of
your health care benefits
during the year
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Communication Recommendations
Pre-enrollment






Pre-enrollment announcement
Pre-enrollment guide
Team member meetings or
webinars
Education and reminders (video,
e-cards, poster)
OneExchange video library
Links to OneExchange carrier
microsites
Enrollment







Post-enrollment
OneExchange information library
OneExchange video library
Videos
Guided annual
enrollment/decision support
process
Provider search
Links to carriers
Wellness incentive plan
modelling

Resource guide

OneExchange information and
video library

Wellness incentive reminders

Ongoing new hire and life event
enrollment

Guided enrollment/decision
support process

Provider search

SPDs
Portal
Customer service support
for plan questions
Customer service support
for plan and enrollment
questions
Customer service support for
plan, enrollment and usage
questions
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Culture and Change Considerations
Have a thorough and thoughtful change and communications strategy
• Grounded in your audiences needs and meets them where they’re most comfortable
• What you want them to know, think and do
• Defined objectives, success measures
Make it simple, easy to understand and intuitive
Engage with multi-media

Most effective, even for tech-savvy audiences – they still want someone to tell them
what’s happening and why
Get in front of and behind the message
Say it 10 times
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A New Health Care Landscape for All Employers


All employers need to build a new, high performing structure to keep
their health plan viable, sustainable and compliant
The role of the plan participant is changed going forward





accountability
engagement
financial investment
You will need to respond in a manner that fits your objectives, culture
and financial constraints
You will need to re-examine your approach every year as the emerging
markets mature and offer new alternatives
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Towers Watson Contacts

Rebecca Duff-Campbell



248.936.7492
rebecca.duff-campbell@towerswatson.com
Janet Vermeulen


248.936.7543
janet.vermeulen@towerswatson.com
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