Snook -Tying strategy and benefit design

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Tying strategy and benefit design Matthew L. Snook

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<ul><li> 1. HR Florida 2011 Tying Strategy and Benefit DesignLearning to Look ForwardMatthew L. Snook, Partnermatthew.snook@mercer.com813 207 6312Services provided by Mercer Health &amp; Benefits LLC.Proprietary &amp; Confidential Not to be reproduced and/or distributed; contents intended solely for use of intended recipient(s).</li></ul> <p> 2. Todays Topic and Its Component Parts The problem The concept The process Context Guiding Principles The pathway Relevant input factors The results a case studyMercer Proprietary &amp; Confidential Not to be reproduced and/or distributed; contents intended solely for use of intended recipient(s). 1 3. The ProblemProprietary &amp; Confidential Not to be reproduced and/or distributed; contents intended solely for use of intended recipient(s). 4. The Problem.with decisions relating tohow benefit programs aredesigned, and how benefitdollars are spent. Too seldom do HR leadersconnect corporate needs, driven by C-Suite guidance,..Mercer Proprietary &amp; Confidential Not to be reproduced and/or distributed; contents intended solely for use of intended recipient(s). 3 5. The ConceptProprietary &amp; Confidential Not to be reproduced and/or distributed; contents intended solely for use of intended recipient(s). 6. The Concept Corporate HR Total RewardsBenefits Health PlanMercer Proprietary &amp; Confidential Not to be reproduced and/or distributed; contents intended solely for use of intended recipient(s). 5 7. The ConceptStart high and let things trickle down Corporate GoalRevenue growth HR Goal High level of employee engagement Total Rewards Ties between revenue growth and Goalrewards opportunities/results Benefits Goal Incorporation of success-sharing aspects in program design Health Plan Direct link between revenue growth and Goalhealth plan deliveryMercerProprietary &amp; Confidential Not to be reproduced and/or distributed; contents intended solely for use of intended recipient(s). 6 8. The ConceptGoals lead to strategies which lead to tacticsHealth Plan Direct link between revenue growth and healthGoalplan deliveryHealth Plan Tie health plan value to varying levels ofStrategycorporate revenue growthHealth Plan Vary employee contribution rates based onTactics prior year revenue growth successTie FSA/HRA/HSA account contribution toprior quarter revenue growth successTie key cost sharing provisions (copays,deductible, etc.) to prior year revenue growthsuccessMercer Proprietary &amp; Confidential Not to be reproduced and/or distributed; contents intended solely for use of intended recipient(s). 7 9. The Concept The Foundations for Health Care Strategy DevelopmentOrganization Culture Platform Taking care of OUR PEOPLE allows them to take care of our customers,without distraction.Taking care of OUR CUSTOMERS guarantees OUR SUCCESS as a company.These are our goals, in this order.Total Rewards Strategy Base Pay will be market and industry competitive Benefits will be above market competitive (60th to 75th percentile) Variable Pay will allow for above-market total cash compensation (60th percentile) Long-Term Incentives will allow those eligible to achieve total compensation at the 75th percentile or higher The ABC Work Experience will enhance the Associates livesComponents of Total Rewards Compensation Long-Term The ABC Work (Base and Benefits Incentives Experience Variable Pay)Mercer Proprietary &amp; Confidential Not to be reproduced and/or distributed; contents intended solely for use of intended recipient(s). 8 10. The Concept The Foundations for Health Care Strategy DevelopmentTotal rewards viewpoint Benefits Ahead of market in keybenefits areas At market in non-key areas Never a reason why anAssociate would leave ABCComponents of Total Rewards Compensation Long-Term The ABC Work (Base and Incentives Experience Variable Pay)Mercer Proprietary &amp; Confidential Not to be reproduced and/or distributed; contents intended solely for use of intended recipient(s). 9 11. The ProcessProprietary &amp; Confidential Not to be reproduced and/or distributed; contents intended solely for use of intended recipient(s). 12. The ProcessMercers five-step consultative / strategy process Understand context1Where are we, and whereImplement, manage do we want to go? 4and measure External environment Build and run Market positionMeasure Business context Improve Financial drivers HR objectives Strategize / Analyze2What are the rules thatRefresh dictate how we accomplish5 Performance to our goals? expected Stakeholder inputUse of data to drive Guiding principles process Define measurement Roadmap adjustment parameters Design3What is the pathway by which we will get there? Consider innovations and alternatives Assess impact of solutions Design and integrateMercer Proprietary &amp; Confidential Not to be reproduced and/or distributed; contents intended solely for use of intended recipient(s). 11 13. The Process Context 1Goals that might contribute to determination of directionRevenue Growth (M&amp;A, Organic Maximize ProfitabilityGrowth) Determine ROI of Various AspectsBrand Awareness/Improvementof Total RewardsDiversification or Focus on CoreEmployee Value/SatisfactionValuesImprovementTurnover Control Employee Engagement/MotivationCulture DevelopmentCost/Value RealignmentExpense Management/Reduction Participant EducationRespond to Aging Workforce Population Health ImprovementIssues Consumer EngagementEstablish Appropriate Competitive Administrative SimplificationPositioningMercer Proprietary &amp; Confidential Not to be reproduced and/or distributed; contents intended solely for use of intended recipient(s). 12 14. Components to Consider in the Context Discussion1Where are we today?Plan Design 1 23 45Rich program withSome consumeristAccount-based plan Account-based plan has Design supportsvery littlefeatures and/or as option andhighest enrollmentcompetitive position; plan employee cost-promoteddesign promotes incentives in someEliminate all first dollar sharingplanscoveragebehavior changeHealth Management 1 23 45Case management Isolated programs Integrated programs Integrated programs Integrated programsonly programcovering parts of health covering part of health covering full health riskcover full health riskprovidedrisk spectrum; little risk spectrum; partialspectrum; entire spectrum; highlycommunicationpopulation; well population; not highly communicated withcommunicated communicated incentives offeredEmployee Incentives 1 23 45 No incentives for Offer raffles and otherOffer significantOffer incentives forConnect incentives to any consumer or nominal incentives forincentives (~$100) forvarious health plan design, payroll wellness-related health fair participation or HRA participation ormanagement activitiescontributions oractions certain employee actions other activities throughout the year contributions to anaccountMercer Proprietary &amp; Confidential Not to be reproduced and/or distributed; contents intended solely for use of intended recipient(s). 13 15. Components to Consider in the Context Discussion1Where are we today? (contd)Consumer Education &amp; Participation 12 3 45Basic tools andEnhanced tools Enhanced toolsTools targeted toPersonalized tools andcommunication provided by health provided to all support necessarycommunication provided by healthplans; not highly membership; solid behavior change; highlyintegrated with program planscommunicatedcommunicationcommunicated offeringsLeadership Engagement 12 3 45Little awareness ofLeadership engaged in Leadership sets strategy,Leadership engaged in Leadership visiblyhealth care strategy strictly cost controlbut does not provide setting strategy andsupports and promotes a direction or resources forprovides support for health &amp; wellness enacting strategyengagement activitiescampaignProgram Measurement 12 3 45Manage year-to- Monitor financial budgetsDocument program Complete dashboardUnderstand cost drivers year financialproactively; measure expectations and of key performancein program; design budgets onlyadministrativemeasure results of metrics and share withinterventions to supportperformance vendor and plan business partnersstrategyperformanceMercer Proprietary &amp; Confidential Not to be reproduced and/or distributed; contents intended solely for use of intended recipient(s). 14 16. The Process Guiding Principles2Guiding Principles: Are the basis for developing the proposed strategy Are used to test whether the strategy still fits as decisions and adjustments are madeGuiding Principles often address the following:Needs indicated by the business environmentGoals of offering the benefits programComfort with being on the leading edgeDesired positioning relative to peer groupsSplit of employer and employee responsibilityAbsolute musts of must not be touched/ jeopardized (sacred cows)Guiding Principles should be developed based onthe information gathered from leadership and/orproject team input.Mercer Proprietary &amp; Confidential Not to be reproduced and/or distributed; contents intended solely for use of intended recipient(s). 15 17. Sample Guiding Principles 2One-page, little detail Benefits targeted at market median with fewer, more meaningful choices Company cost growth to be managed proactively while continuing to provide a safety net for employees Maintain commitment to employees but reduce subsidies for dependents More cost shift through plan design while maintaining protection for catastrophic events Create a culture of health with visible leadership support Manage health care costs through greater focus on health improvement and appropriate use of health care services for employees and their families Offer wide provider networks but encourage use of the most effective providers Develop and broadly share dashboard of key program metrics on a regular basisMercer Proprietary &amp; Confidential Not to be reproduced and/or distributed; contents intended solely for use of intended recipient(s). 16 18. Sample Guiding Principals 2Much more detailed version Guiding principlesCurrent stateObjectives/future stateMarket position Benefits are important but details of theMaintain competitive position for hourlyprograms are not a critical driver ofemployeesattraction/retention (A/R) for mostEnsure better employee understanding andhourly employees satisfaction through improved employeeBenefits are competitive for hourlycommunicationspopulation, less so for salaried Explore option of maintaining separateassociates hourly/salaried programs to ensure ongoing competitiveness of salaried benefitsCompany budget/cost-sharing Control of cost growth is critical, butProactively manage company cost growth duethere is no burning platform to reduce to pressures including rising transit costscompany cost levelsManage health care costs through greater focusCost sharing (payroll deductions) with on condition management and healthsalaried employees seen as improvementuncompetitiveMinimize or negate impact of Health Care Reform (HCR) Improve salaried employee cost share percentageProgram eligibility Eligibility is 35 hours/week Shift PT employees with</p>