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Subtitle, Arial, 20pt., .75 Line Spacing, .5 Before Paragraph
The Affordable Care Act
An Opportunity for Response
February 25, 2014
Agenda
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Aon/Aon Hewitt Overview
ACA Overview and Heath Care Reform
What’s changing and when?
What is an Exchange?
Aon Hewitt Corporate Exchange overview
Q&A
1
AON OVERVIEW
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About Aon
Aon Vision: Aon is universally recognized as the premier global professional
services firm focused on risk advice and human capital management
Aon plc
Aon Risk
Solutions
Aon Service
Corp.
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Finance
Marketing
Human Resources
Technology
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Retail Brokerage
Captive Management
Affinity Programs
Select Personal Lines
Premium Finance
Claims advocacy
& Claims
Administration
 Risk Assessment
& Advisory
Aon Benfield
Aon Hewitt
 Treaty Reinsurance
 Facultative
Reinsurance
 Investment Banking
 Analytics
 Client Services
3
 Health & Benefits
Consulting
 Retirement and
Actuarial Consulting
 Investment Consulting
 M&A Solutions
 Talent and Rewards
 Benefits Administration
 HR Business Process
Outsourcing
 Global Benefits
Aon plc
The leading global provider of risk management services, insurance and
re-insurance brokerage, and human resource solutions
Aon plc
FY12 Revenue $11.5 billion
Aon Revenue
Aon Risk Solutions
Aon Benfield
Aon Hewitt
Greg Case
President & CEO
65,000 colleagues
HR Solutions
34%
Aon Risk
Solutions
Aon Benfield
120 countries
500 global offices
Aon Hewitt
Risk Solutions
66%
(Reinsurance)
Empowering results for clients on two of the most important issues
in today’s global economy; risk and people
4
Aon Overview | History in the Making
5
Aon Overview | Serving Many of the World’s
Best Organizations
of top Fortune 500 firms
of top P&C insurance firms
of top Technology firms
of top Healthcare firms
of top Consumer firms
…are Aon
Clients
of top Financial firms
of top Energy firms
of top Telecom firms
6
AON HEWITT OVERVIEW
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The Expansive Reach of Aon Hewitt
30,000
330
colleagues
around
the world
offices in
90 countries
More than
Serve
20,000
80%
clients globally
of the Fortune 500
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An Established, Industry-Leading Focus on HR
Solutions
Most named Top Consultants on Human Resource Executive and
Risk and Insurance magazine’s annual list of Top Employee Benefit
Consultants for the past five years
Honored with an Outsourcing Excellence Award by the Outsourcing
Center in 2012 and 2013
Named one of 20 Institutional Leaders of the Past 20 Years by
PLANSPONSOR magazine
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Solutions With Scale, Depth and Breadth
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Three Focused Solution Lines
Talent
Retirement
Health
Consulting
Consulting
Consulting
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• Retirement Consulting and
Administration
• Investment Consulting and
Delegated Investment Mgmt.
• Executive Benefits
• Health and Benefits Brokerage
and Consulting
• Absence and Productivity
• Elective Benefits
• Global Benefits
Outsourcing
Outsourcing
Outsourcing
• Talent Acquisition & Recruitment
Outsourcing
• HR BPO
– Global Workforce & Payroll
– Talent Administration Support
• Total Rewards + Online
Communications
• Defined Benefit Administration
• Defined Contribution
Administration
• Financial Services
– AH as Advisor
– Self-Directed Brokerage and
Personal Financial Center
• Compliance Services
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Broad-Based Compensation
Executive Compensation
Sales Force Effectiveness
Leadership & Assessment
Employee Engagement
HR Effectiveness
Health and Welfare Administration
Absence Management
Dependent Verification
Advocacy Services
Reimbursement Account Admin
Compliance Services
Active Health Care Exchange
Retiree Health Care Exchange
Communication, Merger & Acquisition Solutions, Customer Experience
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11
The Industry Leadership to Deliver: Retirement
Navigate retirement risk while providing new levels of financial
security
Macroeconomic Trends
Market-leading Capabilities
 Companies facing huge pension
liabilities and need to de-risk
– Move to fixed income
– Focus on volatility vs. short
term returns
– Settle pension liability
through the insurance
markets and lump sums
 #1 DB and #2 DC administrator
 Pressure on defined contribution
systems to do more
– Focus on financial wellness
and adequacy
– Fiduciary rigor and
governance
– Shift to institutional from
retail approaches
– $2 billion in DC payments monthly; $25 billion in
pension payments for 2.7M retirees monthly; $667
million in lump-sum pension checks monthly
 Investment advice for $4.2 trillion in assets
globally; delegated investment management for
~$37 billion in assets for >130 clients
 Experienced leader in all major de-risking trends
and consultant on largest pension de-risking
action
 Only firm with integrated and comprehensive
solutions across actuarial (~$1 trillion in global
pension liabilities), plan administration,
investments and insurance
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The Industry Leadership to Deliver: Talent
Cultivate talent to drive organizational and personal
performance and growth
Macroeconomic Trends
Market-leading Capabilities
 4 out of 10 employees
worldwide are not engaged
 12 global HR BPO centers; support in 11
languages
 Focus required on culture
and engagement to attract
next-gen talent
 Emerging economies are
growing faster than
available leadership talent
 Increasing need to build
global talent pools
 New pay philosophies
need to align to long-term
results
 Growing interest in SaaS
 Large scale transaction capability: 15M payroll
transactions, assess 8M candidates and hire
59,000 client positions annually
 5,000 talent clients with 17M employees in
40 countries
 50 unique comp & performance surveys
 17M+ responses in our engagement database
 Supported ~30% of PE transactions over last 3
years and 25% of corporate M&A deals over
$15B in 2011
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The Industry Leadership to Deliver: Health
Redefine health & benefits solutions for greater choice,
affordability, and wellness
Macroeconomic Trends
Market-leading Capabilities
Health care costs have risen
52% in past 6 years – similar
trend expected to continue
 Largest provider of health & welfare admin
Health Care Reform actions
driving major change and new
options
– 10k unique health plan designs
– Serve more than 9.5 million health and welfare
participants
– Direct $8B in health premiums annually
 Pioneer in health care exchanges
Companies searching for
global benefit solutions
– 100,000 employees and their families in our corporate
exchange
– 200,000 retirees in our retiree exchange
New strategies needed to
improve population health
 Provide Health & Benefits consulting covering the
health benefits management spectrum
– 90 locations worldwide
– 5,000 large and mid-market clients in both public and
private sectors
 Help 108,000 employees return to work annually
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14
Affordable Care Act
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Why Are We Talking About This?
Health Care Spending
(% of Gross Domestic Product)
20.0%
17.6%
16.0%
12.0%
8.0%
5.2%
4.0%
0.0%
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2009
Spending by Category (2009)
 Health Care
$2.5 trillion
 Food
$0.9 trillion
 National Defense
$0.8 trillion
 Clothing
$0.3 trillion
 Total Pre-tax Corporate Profits
$1.3 trillion
Sources: CMS, Bureau of Economic Analysis, 2009
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About Health Care Reform
On March 23, 2010, the Patient Protection
and Affordable Care Act (PPACA) was
signed into law. The law puts in place
comprehensive health insurance reforms that
will roll out over four years and beyond.
On March 30, 2010, the Health Care and
Education Reconciliation Act of 2010
(HCERA) was signed into law. This act
contains significant modifications to PPACA.
The combined laws are referred to as the
“Affordable Care Act” or more commonly as
“Health Care Reform”. These two laws
together make sweeping changes to existing
laws governing employer-sponsored group
health plans, individual health coverage, and
governmental health programs.
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Health Reform: Keeping it in the Forefront
The Headlines
 2012 saw the Supreme Court confirmation
of the Health Care Reform Mandate
 Congressional repeal remains unlikely
 Major implications for
– State Governments
– Federal Government
– Employers
– Employees
– Providers
What’s Ahead for Health Reform?
2014
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2018
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State exchanges open
Individual mandate
Employer free rider penalty
Employer Responsibility to provide Minimum
Essential Coverage
Limit of 90 Day Waiting Period for Coverage
Wellness incentives move to 30% differential
Excise Tax on High Cost Employer Sponsored
Coverage (*health insurance issuers and
sponsors of self-funded group health plans
will be assessed an excise tax on any
benefits provided to employees that exceed a
pre-determined threshold. aka – “The
Cadillac tax”)
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Health Care Reform Timeline
2010
2011
2012
2013
2014
2018
•Lifetime limits
prohibited
•Over-the-counter
medication not
reimbursable through
Flexible Spending
Account
•Employer distribution
of summary of
benefits and coverage
to participants
•Notice to inform
employees of coverage
options in exchange
•Individual mandate to
purchase insurance or
pay penalty
•Excise tax on high-cost
coverage
•Employer quality of
care report
•Limit of Health Care
Flexible Spending
Account contributions
•State/Federal
insurance exchanges
•Employer reporting
of health coverage on
W-2
•Medicare Part D
subsidy to employer no
longer tax-free
•Comparative
effectiveness fee*
•Tax on high-income
individuals
•Only restricted annual
limits permitted
•Consumer protections
>Preexisting
condition exclusions
prohibited for children
under 19
>Rescission of
Coverage
>Other protections
•Coverage for
preventive health
services
•Extension of
dependent coverage
up to age 26
•Effective appeals
process
•Early Retiree
Reimbursement
Program
•Expansion of adoption
assistance program
credit
•Additional reporting to
State & Federal
governments and Public
•Health Savings
Account excise tax
increased
•Medicare Part D
discounts for certain
drugs in the “doughnut
hole”
•Medicare Annual
Enrollment period
changes
•Comparative
effectiveness fee*
•Employer to provide
minimum health
coverage
•Preexisting condition
exclusions prohibited
•Annual limits prohibited
•Automatic enrollment
(delayed)
•Limit of 90 days on
waiting periods for
coverage
•Employer reporting of
health insurance
information to
participants &
Government
•Increased cap on
rewards for wellness
programs
•Transition Reinsurance
Program
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Business Opportunity & Drivers
The Facts:
 122 million+ active employees with employersponsored group coverage
 94% of employers plan to continue offering
health benefits to active employees
 Retiree market poised to grow at 4.5 million
per year
 Around 48 million people qualify for Medicare
today. 26% of those have employer-sponsored
coverage
 28% of employers plan to move to a corporate
exchange model in the future.
 66% of employers use or plan to move to an
individual market strategy for retiree health care
Note:

Aon Hewitt’s 2013 Health Care Trends survey of more than
800 employers

Aon Hewitt’s 2013 Retiree Health Care Trends survey of
more than 500 employers
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Four Paths for Employers
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House Money, House Rules—Rising Cost and Worsening
Health Risk
Chronic illness accounts for 60% - 65% of all health care spending
Source: 2010 World Economic Forum
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Changing Health Behavior
Top Challenges
Desired Outcomes
Motivating participants to Increase utilization of
promote behavior
wellness and
change—65%
prevention—70%
Top Tactics
Offer incentives or
disincentives to
motivate sustained
behavior change—61%
Government
compliance and
regulations—35%
Increasing participant
Promote a culture of
decision making related health in the
to health issues—62%
workplace—48%
Managing the health of
an aging workforce—
30%
Lower health risk of
population—58%
Move to rewarding
improved health
results or outcomes—
44%
Source: Aon Hewitt 2012 Health Care Survey, available at aon.com/betterhealthresults
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Play on a New Field
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Play on a New Field
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Aon Hewitt Corporate Exchange Survey Results
44% of companies believe they will adopt a Corporate Exchange
form of health benefits delivery over the next 3-5 years
Employer Responsibility for Health Care Coverage
7%
Provides Single Plan; Pays 100%
7%
Provides a Few Options, Employee Pays
Percentage
31%
77%
Joins Corporate Exchange, Provides Fixed
Dollar Subsidy
44%
4%
No Employer Plan, Employees Access
Individual Market
8%
4%
8%
Other
10%
0%
Source: Aon Hewitt, 2011 (n=562)
10%
20%
30%
Current
40%
50%
60%
Future (3-5 Years)
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70%
80%
90%
It Is About Managing Through Reform
The Situation:
 Employers with modest impact will see costs rise 2%
to 5% in 2014
 Employers with low-paid workers, long waiting
periods, 30+ hour employees with no coverage or
low value coverage could see costs increase 20% to
60% in 2014
 Some employers will continue to make incremental
changes to health care programs and will offer more
traditional decision-making tools and resources to
employees
 For other employers, 2014 will mean radically
redefining their health care offerings and helping
employees optimize their coverage and cost through:
Employer plan, Exchanges, Medicaid
 These choices will be heavily influenced by federal
subsidies and state Medicaid entitlement rules as
well as the influx of fully insured lives into state and
federal exchanges
 Employers need to continue to monitor legislative
and regulatory changes
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What is an Exchange?
An exchange is a competitive marketplace that consists
of suppliers and buyers
Exchange
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Exchange Benefits to Employers, Enrollees, and
Carriers
Employers
 Trend mitigation through competition, efficiency
and best-in-market contracting
 Cost predictability
 Risk transfer
 Focus on health and productivity
Enrollees
 Greater choice of plans and carriers
 Flexibility to tailor benefit/contribution trade-offs
 Superior customer experience
Carriers
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Market share opportunity
Earnings potential (full premiums vs. administrative fees)
Product innovation and control
Attractive risk pool
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Corporate/Private Exchange Goals
 Create a competitive market in health care benefits at a retail/consumer level
– Will drive efficiency and mitigate trend through competitive forces
 Facilitate the movement to a defined contribution model for those
employers who are aligned with this philosophy
– Jump off the health care trend curve to a compensation-like rate of increase
– Treat health benefits as an element of total rewards
 Expand choice, drive efficiency and simplicity, but allow consumer
selections that could not be driven unilaterally at the employer level
– For example, narrow networks, select formularies
 Provide an alternative to state exchanges for large employers before 2017,
and transition to an individual model when the market is ready
 Consolidate purchasing power in the private sector to drive systemic reforms
of the health care delivery system
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Aon Hewitt Health Care Exchanges
Private Exchange
Now
Future
Now
Individuals
eligible for
government
programs such
as Medicaid
and Children’s
Health
Insurance
Program (CHIP)
Employees of
Small Business
Now
Future
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Individual or Group Health Plan
NonMedicare
eligible
individuals
(i.e., pre-65
retirees,
active
employees)
Aon Hewitt State Exchange
Individual Health Plan
Pre-65
Retirees
and
Actives
Individual Plan
Medicare
Eligible
NonMedicare
eligible
individuals
(i.e., pre-65
retirees,
active
employees)
Aon Hewitt Corporate
Exchange
Group Health Plan
Individual Health Plan
Aon Hewitt
Navigators
Public Exchange
Employees
of Large
Business
(over 100)
Future
Aon Hewitt Health Care Exchange Initiatives
Aon Hewitt Health Care Exchange Portfolio
Individual
Exchange
Group
Exchange
State/Federal
Exchange
Active + / or Pre65 Retirees
Aon Hewitt
Corporate
Exchange
Active + / or Pre65 Retirees
H&B Consulting
Post-65 Retirees
Aon Hewitt
Navigators
Pre-65 Retirees
Aon Hewitt
Navigators
Actives
Aon Hewitt
Navigators
In development
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Navigators – We Make it Easy
With Aon Hewitt Navigators, employers can realize significant cost savings by
seamlessly transitioning retirees to the individual market while still providing
the support they need to navigate the complex Medicare market.
EDUCATION
ADVOCACY
RETIREES
EMPLOYERS
 Free access to personalized
healthcare advisors
 Medicare expertise
 80 Carriers and 3300 products
 Advocate to navigate issues
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Significant Cost Savings
Financial Predictability
Turn-key Implementation
Proven network, all major
carriers
 Integrated HRA
CHOICE
ENROLLMENT
Over 240,000 retirees served with over 92% satisfaction
33
Corporate Exchange: How It Works
34
Value Proposition—Making This Work for All Stakeholders
Clients
 Risk transfer and predictability
 Trend mitigation through competition, efficiency, and
best-in-market contracting
 Focus on health and productivity
Employees
 Greater choice of plans and carriers
 Superior customer experience
 Flexibility to tailor benefit/contribution trade-offs
Carriers
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Market share opportunity
Earnings potential
Product innovation and control
Attractive risk pool
35
Corporate Exchange Shopping Experience
36
Gain Predictability and Risk Transfer without Cost Increases
Insurers will have accountability for managing
care; price becomes critically important
With competition mitigating trend, plan
sponsors can move to a DC approach without
long-term cost-shifting to associates
In every consumer market,
competition reduces cost
Insured Plans
Defined Contribution
Subsidy
Competition
Reduce Trend
Remove Volatility
Ensure Employee Sustainability
Choice and Flexibility
Freedom of movement across insurers will keep
costs low and service levels high generating
more control and increased satisfaction
Best-in-Market
Efficiencies
Consumerism
Regional rating bands allows marketspecific insurer strengths to emerge
Consumers will make economic choices if
they can reap the full economic benefit
No “Silver Bullet”: Six Key Levers Working in Concert
37
Q&A
38
Aon and ACA: Trivia
1) Who is the CEO of Aon?
2) What does Aon mean?
3) How many people do we administer benefits
for?
4) How many colleagues do we have globally?
5) What is an Exchange?
6) Which company did Aon Hewitt contract for
the Corporate Exchange for benefits in
2014?