Private Exchanges - The Future of Health Insurance? Presented By: Rob DiMase & Greg Puig

Transcription

1 Private Exchanges - The Future of Health Insurance? Presented By: Rob DiMase & Greg Puig

2 Why are employers considering the Private Exchange model? Health insurance costs have increased by double the rate of inflation 1 Employees and employers contribute 40% and 34% more to health benefits than they did five years ago th Annual Towers Watson/National Business Group on Health Employer Survey on Purchasing Value in Health Care, Towers Watson, 2012.

3 Average annual premium costs and the Cadillac tax Average annual premium cost for Single coverage $6,025 1 Average annual premium cost for Family coverage $16, Cadillac tax threshold for Single coverage $10, Cadillac tax threshold for Family coverage $27,500 1 Kaiser Family Foundation 2014 Employer Health Benefits Survey

4 Survey says... Many companies only offer their employees one choice of health care coverage However, most employees are willing to pay a larger share of their health insurance premium for the opportunity to tailor benefits to their needs. 2 2 Let Them Have Choice: Gains from Shifting away from Employer-Sponsored Health Insurance and toward Individual Exchange, Dafny, Ho, Varela, July 2011.

5 Why do employees want choice? In 2012, 95% of the population accounted for half of health spending The top 5% of people who spend the most on health care spend an average of around $43,000 annually People in the top 1% have average spending of almost $98,000 At the other end of the spectrum, the 50% of the population with the lowest spending accounted for less than 3% of all total health spending The average spending for this group was $ Kaiser Family Foundation analysis of Medical Expenditure Panel Survey, Agency for Healthcare Research and Quality, U.S. Department of Health and Human Services

6 Key components of a Private Exchange 1. A defined contribution strategy 2. Multiple choice of health plans 3. Portfolio of ancillary products 4. Decision support tools

7 Defined contribution Think 401(k) versus defined benefit pension plan Set dollar amount not a percentage of premium Greater consumer engagement Cost certainty Fairness

8 True defined contribution Current annual payroll: $ 11,552,204 Current benefit eligible employees: 212 Employees on health/dental plan 183 Coverage Annual Premium Cost post cost sharing Cost as a percent of payroll - post cost sharing Cost per employee - post cost sharing Health Insurance $ 2,353,364 $ 1,814, % $ 8, Dental Insurance $ 152,614 $ 107, % $ Vision Plan $ 21,707 $ 21, % $ Life Insurance $ 24,264 $ 24, % $ Short-term Disability $ 29,995 $ 29, % $ Long-term Disability $ 28,033 $ 28, % $ Summary $ 2,609,977 $ 2,026, % $ 9, Percent of premium paid by Employer 77.63%

9 More choice of plans Most employers offer fewer than 3 choices for employees Exchange model reduces the administrative burden of providing more choice Wider range of plan options satisfies a wider segment of employee populations More flexibility for employees to design a plan that meets their individual or family needs

10 Ancillary products

11 What is the user experience? A web based portal that allows an employee to shop online and customize a benefits package, supported by decision-support tools.

12 Types of Exchanges Feature Public Exchange Private Exchange Who manages it? State or Federal government Private company Source of funding? Taxes Employer or employee paid fees Offers a variety of health plans? Offers premium subsidies? Yes No Offers ancillary benefits? No (may offer dental) Yes Offers group insurance? Offers decision support tools? Yes No (may of offer small group only) Generally no Yes Yes Yes

13 How the exchange works for employees

14 Decision support tools EMPLOYEE INPUT EXPECTED UTILIZATION HEALTH STATUS NETWORK PREFERENCES INCOME SAVINGS RISK TOLERANCE HEALTH & FINANCIAL CONCERNS HEALTHCARE CONSUMERISM HEALTH FINANCES PERSONALITY STATISTICAL MODELING A sophisticated algorithm creates a Recommendation considering: Types of plans that match people s specific needs and wants A cost that balances premiums with expected out-of-pocket expenses A match to physician network preferences and overall desires and concerns HEALTHCARE COSTS & UTILIZATION PUBLIC DATA

15 Example of Employee Selection Tools

16 P inpointing a specific recommendation Chris & Family Tom Alicia Cost is $1,300 Cost is $550 Cost is $675 (includes her monthly metro card) HMO HEALTH PLAN (Copay) HDHP HEALTH PLAN LONG-TERM DISABILITY POS HEALTH PLAN

17 Should the size of my company matter in an exchange world? Percent of Employers Considering a Private Exchange 10 to 50 26% 56% 51 to % 101 to 3,000 <3,000 20% 23% Companies of all sizes are considering the transition to an exchange based model. Some believe exchanges can become the most significant driver of member satisfaction. Metlife US Employee Benefit Trends Study, 2014

18 Do employer s believe that an exchange model will lower costs? Is a private exchange the right choice for my employees? 40% Of Employers agree that health insurance exchanges offer new, low-cost saving options 33% Of Mid-Size and Large employers agree that health insurance exchanges offer lower cost options than current offerings Metlife US Employee Benefit Trends Study, 2014.

19 Exchanges can increase employee confidence - The benefit information was easy to understand - My company s benefit communications effectively educated me on my options - I worry my coverage may not be enough Impact drivers Impact driver Impact driver Metlife US Employee Benefit Trends Study, My company s benefit communications helped me understand how much I would pay

20 Pros Cons More control over the employer contribution Employees generally receive reduced benefits Merging technology and healthcare Decision support tools don t fully replace human interaction Additional benefit choices for employees Potential buyer s remorse Alleviates some of the administrative burden on employers Not all employees are tech savvy

21 Questions?