benefits capes and analysis

L O C K T O N C O M P A N I E S

Lockton® Employee Benefits Consulting Capabilities

Prospect

November 2015• Lockton Companies

1

PROPOSED AGENDA

Introduction to Prospect

Lockton Companies Overview

Core Services

Our Process

Renewal Process and Cost Management

Appendices

2

INTRODUCTION TO PROSPECT

BUSINESS

ENVIRONMENT

YOUR

CULTURE

BENEFITS

PLANS

CURRENT

ADVISOR

State of your business and marketplace?

Issues associated with growth or reduction in revenue?

M&A activity?

Where do benefits fit in your employee value proposition?

Current employee satisfaction level/conducted surveys?

What types of plans do you offer?

What is your benefits philosophy?

Are you satisfied with your current vendor partners?

Extension of your team?

Are they proactive?

What resources do they bring to the table?

3

LOCKTON COMPANIES OVERVIEW

BUILT TO ADD VALUE AND PUT CLIENTS FIRST

Industry Leading Business Model

Largest Privately held broker in the United States

64 Global Offices and 4,950 Professionals in Global Network

Voted “Best Places to Work” seven years in a row

Seek reasonable margins – ability to reinvest in resources and people

Localized leadership and decision making – industry leading client and employee retentions statistics

History of sustained double digit growth

Local Market Presence

Offices in Washington, DC and Fairfax, VA

100+ associates specializing in Employee Benefits, Business Risk, and Retirement

Focus on Middle Market and Fortune 1,000 employers

Industry focus in Government Contracting, Technology, Non Profits, Law Firms

Current Local Market Knowledge – Metro DC Survey of Benefit Strategies and Trends

Delivering Client Value

Continuity of our Service Teams

Ability to attract and reward the best talent in the industry

Access to Specialty Resources (not project based or hourly fee based)

Negotiation leverage with insurance carriers

Focus on identifying issues and creating solutions – not selling products

Nimble organization in a dynamic marketplace

Industry-Leading Business Model

Local Market Presence

Delivering Client Value

4

PROVEN SERVICE MODEL

ADDRESS KEY PLAN MANAGEMENT QUESTIONS

Are your plans competitive?

Are your plans financed correctly?

Are your plans administered efficiently?

Are your plans compliant?

Do your employees value and understand your benefit plan?

Are your employees engaged/invested in your benefit plans?

Is there a multi-year strategy?

5


CORE ADVISORY SERVICES

Strategy Development from a Trusted Advisor

Annual strategy and market update

Multiyear strategy development

Benchmarking

Management and employee surveys

Merger and acquisition due diligence

Health Risk Solutions

Program design and implementation

Vendor selection and management

InfoLock®—data mining resource (self-funded clients)

Wellness specialists on staff locally and nationally

Financial Analytics

Renewal negotiation

Market proposal review and analysis (all lines)

Contribution and plan design modeling

Alternative funding analysis

Underwriters and actuarial specialists on staff locally and nationally

Communications

Open enrollment support—meetings, guides, benefits- at-a-glance, etc.

Special communications campaigns—wellness, consumerism, health reform

Communications specialists and graphic design resources on staff locally and nationally

Benefits Plan Management

Vendor management

Day-to-day issue resolution

Cost tracking and analysis

Compliance — ERISA, PPACA, federal and state review and support

International benefits specialists on staff locally and nationally

HR Technology & Outsourcing

Specialty practice—vendor relationships and market intelligence

Benefits administration solutions and private exchanges

Vendor selection, implementation, and management

6


ENGAGED THROUGHOUT THE PLAN YEAR

Review plan documentation

Recap of enrollment process

Review vendor performance

Close out loose items

Market update

Review vendor performance

Set annual service calendar

Projected renewal action

Benchmark cost and plan design

Determine marketing strategy

Discuss cost management strategies

Client-focused RFP

Focus on key metrics

Financial and technical analysis

Finalist meetings (as needed)

Communications strategy

Enrollment meetings

Specialized plan messages

Review/managed enrollment process

Plan Year Recap and Annual Stewardship Annual Strategy

Meeting

Pre-renewal and Benchmarking Analysis

Renewal and Plan Marketing

Open Enrollment Communications and Administration

DEDICATED LOCKTON TEAM

We use a proven annual service model to deliver best-in-market strategies and day-to-day service to our clients.

7


ANNUAL SERVICE CALENDAR- MANAGE THE DAY TO DAY

JANUARY FEBRUARY MARCH

· Renewal effective 1/1

· Request 2015 carrier SPDs

· Post-enrollment meeting with HR as an OE debrief (1/31)

· Audit January carrier invoices for rate accuracy

· Communications outreach strategy discussion with client

· Provide quarterly claims analysis (if qualified to receive the AER report)

· Provide imputed income (1/31)

· Make San Francisco HCSO contribution (1/30 if necessary)

· Review and finalize carrier SPDs

· Submit Annual Notice of Creditable and/or Non-Creditable Coverage to CMS (electronic submission) (due 3/1)

· Post-enrollment employee education (if needed)

· Potential planning meeting (TBD)

· Communications outreach (if decided)

· Request data for claims and tracking (if qualified)

· Distribute 2015 carrier SPDs (due 3/31)

· Potential planning meeting (TBD)

· FSA discrimination testing

April May June

· Request schedule A info for 5500 filing (due 7/31)

· Provide quarterly claims analysis (if qualified to receive the report)

· Make San Francisco HCSO contribution (4/30 if necessary)

· File San Francisco HCSO reporting for 2014 (4/30)

· Request updated census · Coordinate form 5500 preparation at Lockton

· Exchange notice (within 14 days of hire)

· Communication outreach (if decided)

· Request claims and tracking (if qualified)

· Provide draft 5500s and SARs for review

July August September

· Form 5500s due to DOL (7/31) · File San Francisco HCSO reporting for prior calendar quarter

(4/30)

· PCORI tax due 7/31 (carrier submitted)

· Annual prerenewal and benchmark meeting (mid-July)

· Develop RFPs (if necessary and send to the markets)

· Analyze RFP responses

· Distribute SARs to employees (9/30)

· request claims and tracking (if qualified)

· Communications outreach (if decided)

· Request carrier renewals

October November December

· Initial renewals received and negotiated (TBD based on CF release)

· Employee benefit renewal meeting (TBD including plan options/employee contribution alternatives)

· Medicare Part D Notices of Creditable or Non-Creditable Coverage due to employees (10/15)

· Provide quarterly claims analysis (if qualified to receive the report)

· OE planning meeting

· File San Francisco HCSO reporting for prior calendar quarter (10/30)

· Finalize renewal decisions and employee contributions (early November)

· Renewal finalization with carriers

· Complete COBRA rates and OE material needs with vendors and coordinate OE with carriers

· Develop initial OE communication for review and direction

· Coordinate/facilitate/host open enrollment meetings and webinars (early to mid-November)

· Coordinate/facilitate carrier OE communication material for delivery

· Provide SBCs (due re-enrollment period) · File enrollment data with HHS for Transitional Reinsurance

Fee, and schedule payment (11/15)

· Submit OE changes to carriers (no later than 12/15)

· Communications outreach (if decided) · Request AER for claims and tracking (if qualified)

8


MULTI-YEAR STRATEGY – ALIGN YOUR CORPORATE GOALS

Cost Savings and Member Accountability

Empower with Information

Partner to Keep Plans Affordable

2015 2016 2017

Participant Cost-Sharing

Benchmark and evaluate plan values and contribution strategy • Increase cost sharing (deductibles, etc.) • Transition to defined DCS contribution

to medical plans Introduce or expand HDHP

Position HDHP as plan of choice Maintain defined contribution

Measure and manage status quo if appropriate

Eligibility Management

Increase dependent cost share Fine-tune dependent verification process Tobacco surcharge

Hold active open enrollment Amnesty dependent audit Spousal surcharge

Engage third party for dependent eligibility audit

Purchasing Efficiency

Competitive market analysis—all plans Cost savings with low employee impact

(stop loss coalition, pharmacy evaluation, plan feature modernization) • Streamline (revisit Dayton plan)

Promote cost comparison tools Decision support Health advocate Evaluate innovations (e.g. exchanges, ACO

promotion, centers of excellence, subrogation carve-out, telemedicine)

Continue to assess vendor partnership to maintain best-in-class

Evaluate innovations (e.g. exchanges, new technology)

Health Promotion and Risk Improvement

Understand claims drivers—InfoLock Promote efficient use of services through

education and design Centralize and expand wellness program

Establish a wellness committee and partner support Introduce contribution incentive for 2017

• Biometric screenings • Health assessment • Tobacco cessation

Track plan/wellness progress with Infolock

Implement third-party wellness partner

Contribution incentive shifts from participation to improvement (outcomes long term)

Add spouse requirements Track plan and wellness progress

with Infolock

Health Reform Strategy

PLAY; eligibility changes? Prepare for automatic enrollment (low plan?)

Reduce excise tax exposure Reduce excise tax exposure Consider elimination of FSA and/or

HSA

9

2016 RENEWAL CYCLE AND COST MANAGEMENT

STANDARD

UNDERWRITING

Rate Component 0% Renewal Trend Renewal (9%) Market Renewal

Current Premium 100.00% 100.00% 100.00%

Effective Trend (14.6%)

Experience Period Claims 65.67% 78.41% 84.52%

Projected Claims 75.26% 89.86% 96.86%

Retention

Administration 15.75% 15.75% 15.75%

Commission 3.50% 3.50% 3.50%

ACA Fees and Taxes 5.49% 5.49% 5.49%

Total 24.74% 24.74% 24.74%

Renewal Increase 0.00% 14.60% 21.60%

Cost Management Tools Sample Strategies/Tactics

Purchasing efficiency Change insurance carriers

Alternative funding options

Eligibility management Spousal surcharge

Dependent audit

Health promotion and risk improvement Wellness tied to payroll contributions or

accumulation account contributions

Participant cost-sharing Increase payroll contributions

Reduce actuarial value of benefit plans

10


LOCAL MARKET – 2015 PLAN YEAR

Data Cut Savings Horizon Employee Impact

All

Employers

Less than 200

Employees GovCon Technology & Telecom Short

Mid Term Long Low Med High

Respondents 213 91 84 55

Purchasing Efficiency

Reviewed market for a more competitive medical plan 21% 27% 23% 27%

Changed medical plan funding methodology 4% 1% 5% 9%

Eligibility Management Implemented a spousal surcharge 1% 0% 2% 0%

Health Promotion and Risk Management Implemented or increased the focus on

disease management programs 5% 0% 2% 4%

Implemented or increased the focus on wellness programs 18% 9% 20% 20%

Participant Cost Sharing Increased employee payroll contributions 51% 43% 57% 53%

Increased family payroll contributions 50% 45% 56% 53%

Increased deductible 24% 19% 27% 31%

Increased office visits copayments 13% 14% 13% 20%

11


LOCAL MARKET – LOOKING AHEAD

Market Trend Local Market Impact Prospect Considerations

Consumer Driven Health Care Carriers working on stand alone, integrated exchange solutions

14% of employers planning to move to full replacement model

Currently offer HRA with Blue Rewards Impact of HSA on employee engagement and

overall cost

Health Risk Solutions (Wellness) Spousal surcharge 21% of employers plan to tie wellness to payroll

contributions, 21% plan to tie to accumulation account contributions

69% of employers Totally Agree or Agree that investments in wellness will reduce long-term healthcare costs

Integration with current Blue Rewards and consumer driven plan

Interested in promoting a culture of wellness; need top down approach

Alternative Funding Carriers introducing more hybrid products for smaller employees (less than 250)

12% of all employers (and under 250 employees) plan to change to a self-funded model

Risk tolerance of organization Group demographics and historical experience

Private Exchanges with Defined Contribution Approach

Carriers working on stand alone, integrated exchange solutions

2% of employers introduced an exchange for 2015; 18% plan to implement due to the Cadillac Tax

Value of Defined Contribution Are employees ready to shop for insurance like

they shop for other products on the intranet?

Communications Traditional communications mediums are most prevalent

Smartphones and Social Media are the future of communications

How wireless is your population? How effective is your current communication

strategy/mediums?

Plan Design Management – Choice and Value (Cadillac Tax)

21% of employers plan to limit plan options 33% of employers plan to reduce the actuarial

value of their healthcare plans

Where does healthcare fit in your Total Rewards strategy

What is competitive?

12

APPENDICES/SUMMARY OF LOCKTON SERVICES

Actuarial

Communication

Compliance

HR Technology and Outsourcing

Global Benefits

Retirement Services

13

ACTUARIAL SERVICES

%

Financial Modeling

Network Access and Quality Analysis

Network Feasibility Analysis

Plan-Design Modeling

Plan-Design Support

Network Evaluation

Self-Funded Plan Support

14

BENEFIT COMMUNICATIONS

IMPLEMENTATION

Coordination and active follow up with carriers to implement new vendors/changes

Review all carrier documents (e.g. SBCs)

Manage online enrollment system to make updates and participate in testing

Secure face-to-face enrollment firm, if desired

CUSTOMIZED COMMUNICATIONS

Executive Messaging and Manager Education

Employee Education

Decision Support

Brainshark, Jelly vision, Smart Phone App, Guidespark

Presentations

Newsletters

Guides

FAQs

Posters/Announcements

OPEN ENROLLMENT SUPPORT

In-person and/or Webinar meetings

Company Events/Health Fairs

Lunch-n-Learns

Lockton Mobile App

15

BENEFITS COMPLIANCE/HEALTH CARE REFORM

ADVISORY SERVICES

KEEPING YOU COMPLIANT

WHO WE ARE.

Attorneys with 90+ years of

combined experience

Compliance advisors

Wellness planners

Compensation specialists

Number crunchers

Technology experts

WHAT WE KNOW.

ACA, ERISA, COBRA, HIPAA, etc.

Internal Revenue code

Health reform

State insurance laws

Public Health Service Act

Corporate wellness program

compliance

WHAT WE DO.

Interpret legislative guidance

Help you prepare for cost

impacts

Ensure that your company is

compliant

Integrate the response to

health reform with overall

compensation and benefits

strategies

16

HEALTH REFORM TOOLS AND RESOURCES

REPORTING & DISCLOSURE

Dozens of

Communicatio

n Pieces

Easy to

Customize

Reviewed by

Lockton

Compliance

Team

Regularly

Updated

Posters, Postcards,

Memos, Presentations,

& More

TURNKEY TOOLKIT

PUBLICATIONS & PRESENTATIONS

17

HR TECHNOLOGY AND OUTSOURCING

STRATEGIC PROCESS

AREAS OF EXPERTISE

HUMAN RESOURCES

Applicant tracking

Talent management

HRIS

Employee/manager

self-service

PAYROLL

Time and

attendance

Payroll solutions

Tax filing

BENEFITS

COBRA, HIPAA, FSA

401(k)

administration

Benefits eligibility

Benefits enrollment

18

GLOBAL BENEFITS

Our Services

Design, placement, ongoing service, and account management

Coordinate with local brokers in countries outside the US

Global benefits management

Multinational pooling

GLOBAL BENEFITS MANAGEMENT TOOLS

L O C K T O N C O M P A N I E S

19

FIDUCIARY RISK

MANAGEMENT

Comprehensive

fiduciary review

and fiduciary

education

Plan-compliance

services

Documentation of

all processes and

procedures

INVESTMENT

CONSULTING

Proprietary

investment

database

Customized

investment

analysis

PLAN PROVIDER

MANAGEMENT

Independent-

provider database

Service-fee

benchmarking and

negotiation

Provider-search and

plan-conversion

consulting

Vendor

optimization

RETIREMENT SERVICES

20

Our Mission

To be the worldwide value and service leader in insurance brokerage, employee benefits, and risk management

Our Goal

To be the best place to do business and to work

www.lockton.com

© 2014 Lockton, Inc. All rights reserved.

Images © 2014 Thinkstock. All rights reserved.

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