2 Cottingham & Butler Introduction Privately held - established in 1887Headquarters in Dubuque, IANational provider of employee benefits and risk management solutions – clients in 48 statesOver 3,500 customers450+ employees38th largest Insurance Broker in U.S.Recognized for excellence“Agency of the Year” National Underwriter“Agency of the Year” Rough Notes MagazineProfessional services firm – focused on culture and growing organically
3 Office LocationsA number of larger offices, with some individual sales offices95% of businesses outside of Dubuque, IAClients in 48 states, ranging from Florida to Alaska, Maine to California
4 Why We Are Different Depth and breadth of capabilities: Property & Casualty InsuranceCasualty Claims Administration (TPA)Captives & ProgramsSafety & Loss Control Consulting ServicesEmployee Benefits Brokerage & ConsultingBenefit Claims Administration (TPA)Medical Management ServicesWellness & Condition Management SolutionsPersonal Insurance ServicesRelentless focus on outcomes and resultsWilling to take risks and be innovativeProvide alternative financing strategies to reduce insurance costsExceedingly focused on metrics and analytics to get behind activity and discern the real impactConstantly pushing ourselves to get better
5 Brokerage Expertise & Accountability We organize our traditional brokerage sales and service into practices –Risk Management and Employee BenefitsIndustry Expertise: Transportation, Tribal Nations, Agribusiness, Construction, ManufacturingClaims ManagementCasualty TPA that handles worker’s compensation & liability claims99+% Retention RateMedical Claims TPAPay claims for over 250 self-insured clientsOver last 3 years, our average increase in cost per employee per year has averaged less than 3% compared to the industry average of 10%Onsite Clinical Expertise and Wellness TeamFull-time Medical Director, 24 Nurses, and team of Certified Health CoachesUtilization review, case management, and condition management to over 100,000 individuals.
6 Brokerage Expertise & Accountability Safety ConsultingEight full-time safety professionalsService provided to our brokerage clients as well as a la carteCaptive & Program ManagementDeveloped four trucking captives, including the largest member-owned group trucking captive, and a heterogeneous captive for non-trucking clients.Each captive has retention rates in the high 90% range.
7 Today’s Agenda and Presenters Pay As You Go Workers’ CompensationMatt Murray, Risk Management Account ExecutiveP&C Overview and Risk Management Audit (RMA)Jeff Bair, Risk Management Sales ExecutiveBenefits Consulting Services and CapabilitiesBrad Plummer, Jane Mueller & Nicole Pfeiffer, Employee Benefits Vice President/Sales ExecutivesHealthCheck360°Michael Kelly, Director of HealthCheck360°
8 Pay As You Go Workers’ Compensation -Matt Murray
9 What Is Workers’ Compensation? Coverage for an injured worker while in the course and scope of employment.Mandatory coverageHow is it priced?Each carrier has a different appetite. Pricing can be wildly different from carrier to carrier.An experience modification factor (mod) is applied to each account. In it’s simplest form a rating of an account based on “average” is average; greater than one below average; less than one above average.Carrier can apply discretionary credits/debits, dividends and other pricing tools.Each class code and state has it’s own rate.
10 Critical to Success in Workers’ Compensation Licensed insurance professionalsContracts with the key carriers offering pay as you go solutions and significant volume with each carrier todayKnowledge of states and negotiationAs mentioned earlier, each state varies significantly on how workers’ compensation is priced.Iowa – State sets rate, carriers can deviate +/- 30%Illinois – Carriers can essentially charge whatever they want.Wisconsin – State sets rate, each carrier has the same premium. Only way to change the premium is a dividend.Minnesota – A loss cost multiplier state. Large variance in what each carrier would have for rates.
11 Why Pay as You Go? Growing trend in companies wanting this option Payroll companies including ADP, Ceridian and Paychex are offering this as a bundle with the payroll servicesIf HK is not talking to clients about bundling the services together, one of your competitors may be
12 Current Situation Pay as you go Solution Why Use Pay as You Go? 25% down and 9 equal payments? 10 equals? Potentially monthly if the carrier is willing to offer.Premium is based off a best “guess” on what the payroll will be for the upcoming yearIf the “guess” is not accurate, there is opportunity for significant additional premium or return premiumCash flow is based off your estimates and available pay plansNo deposit or down payment required for the clientPremium payments are based on actual payrollLess audit issues due to the premium being calculated “real time”Improved cash flowNo checks to write or invoices to pay for the insuredIntegrates with Infinisource, once the initial set up is complete, the premium is determined when payroll is run automaticallySimply put…a billing option.
13 What Companies Fit?All companies can fit for the pay as you go option. The following categories have the greatest take up.Under 100 employeesContractorsSmall businesses with cash flow issuesCompanies that have had historical workers’ compensation audit issuesWill this work for every company?No, each company will still need to be individually reviewed by the insurance carrier to determine if the carrier will released a workers’ compensation quote.If a carrier is setup for Pay as You Go quotes…it can be done.
14 What Insurance Carriers Offer Coverage? Many companies you may know…More and more carriers are beginning to offer the option
15 When Should C&B Get Involved? If a client is interested in the option, C&B will engage and gather the needed informationC&B will obtain competitive workers’ compensation optionsProvide Proposal to HK & clientIf they elect to go with the HK/C&B, we will immediately bind coverage and start the process of getting the client set up for the automatic paymentsBasic data needs to be included by HK in the data file to the pay as you go softwarePayroll Company IDPayroll Period Start DateEmployee NumberCheck DatePayroll Period End DateSubject WagesClass CodePolicy Effective DateTemplateFEINPolicy Expiration DateState
16 How Does the System Work? A net rate will be determined and automatically loaded into the system.The client needs to assign a class code to each employee on initial setup. This is only needed on intake and with any new hires.Once this is complete, each payroll period will automatically generate the correct premium. An will be sent to the client, HK and C&B confirming the payment amount.A fee of $5-$9 will be charged to the client per pay period depending upon premium size.
17 The Workflow Payroll Data file collected with needed info HK PayrollPayGo SoftwareC&BClientPayroll Data file collected with needed infoSoftware Interfaces with PayGO to automatically send payroll dataProvides a class code per employee & verifies in Payroll SoftwareProvides new hire / terminated employee info throughout year, needs to verify employees class code.Develops net rate by state & class codeAutomatically links rates with payrollACH set up to withdrawal premium per pay period.Negotiates and binds quote with carriersProvides bound quote to PayGo
18 How Do We Get This in Front of Clients? Ideas for DiscussionIntroductory mailer, showing the partnership between HK and C&B and ability to offer the payroll services and pay as you go workers’ compensationQuarterly webinars to provide knowledge and benefits of the program to HK clientsFollow up by C&B or HK Payroll (to be agreed upon)
19 Getting StartedSeveral of you may have a clients/prospects in mind that this option would work forC&B would run 2-3 pilot companies through the pay as you go platformIntegrate systems, work kinks out, and get a working knowledge of how the process will go
20 Your ResourceWho to contact at C&B for Pay as You Go Workers’ Comp: Matt Murray| Risk Management Account Executive |
22 Risk Management Practice Areas Everything But Trucking and BenefitsManufacturingConstructionFood Related CompaniesTribal / CasinosTarget $100K Premium and HigherMidwest –2nd Tier Cities – Under the Radar of Large National BrokersIowa, Wisconsin, Illinois, Minnesota, Indiana, Michigan, South Dakota, Nebraska, Missouri
23 Business Model <$100K Premium – Price Sensitive 1.) Insurance Program Design2.) Brokerage Services>$100K Premium – Service Sensitive1.) Risk Management Program Design3.) Safety Services4.) Claims Advocacy5.) Third Party Claims Administration
24 Consulting Competencies Insurance Program DesignAlternative RiskCaptivesLarge DeductiblesSelf InsuranceRisk Management ServicesSafety Programming and ConsultingClaims AdvocacyThird Party Claims AdministrationUnbundled Claims Administration
25 Consulting Competencies Insurance Program DesignRisk Management AssessmentProgram DesignPremium and Coverage BenchmarkingObjective –Move away from price and develop conversation around program designDevelop consulting relationship rather than price shopping
26 Consulting Competencies Insurance Program DesignRisk Management AssessmentProgram DesignPremium and Coverage BenchmarkingMarket PerceptionCrazy StuffFruit and Vegetable Distributor’s cargo policy excluded Fruits and VegetablesEntire building schedules uninsuredEgg Producer Umbrella policy excluded salmonella outbreakEvery policy reviewed has had material findingsOutcomeProperly Designed Program Tailored to Individual ExposureMore informed underwritingMore Coverage / Less Premium = VALUE
27 Consulting Competencies Alternative RiskCaptivesLarge DeductiblesSelf InsuranceSignificant percentage of clients participate in an alternative risk program.Shift from an annual insurance renewal to an annuity corporate finance project.Lower Total Cost of RiskInsurance becomes less expensive as they take more risk.More operational focused since they have skin in the game.
28 VIP - Personal Insurance Unique Needs for VIP’sLarge Property HoldingsHigh ValuesFeaturesHomeowner policy guarantees full replacement costSewer and Water Backup to Full limits of the policy.Auto Agreed Value with OEM replacement partsAgreed Value for Jewelry, Furs, Art and other valuablesExclusive access to top 5 affluent personal insurance markets that cater exclusively to affluent clientsPure, AIG Private Client, Chubb, AceComplete personal assessment – appraisalsPrivate Client Concierge ServicePrivate Client Service CenterConfidential
29 Who to contact at C&B for Risk Management solutions: Your ResourceWho to contact at C&B for Risk Management solutions:Jeffrey Bair| Risk Management Sales Executive|What to expect:Respect that it is your relationshipWork hand in hand with youContinued communication with you during process
30 Benefits Consulting Services and Capabilities -Brad Plummer, Jane Mueller, andNicole Pfeiffer
31 Example of Key Account Client Service Team Assignment Krista SigmanDirector of Group & Voluntary BenefitsPhone: (563)Jane MuellerSales ExecutivePhone: (563)Cell: (563)Linda PerryCompliance & Human Resource SpecialistPhone: (563)Nicole PfeifferSales ExecutivePhone: (563)Cell: (563)Julie HarbaughPPO Network Utilization SpecialistPhone: (563)Christine Storlie, MBA, PHRManager of Client Human ResourcesPhone: (608)Kathy HertingPlan Document SpecialistPhone: (563)Craig Herbst, CPASenior Business AnalystPhone: (563)Melanie KintzleBenefit Services Unit ManagerPhone: (563)Cell: (563)Devon MullnerBenefits Services RepresentativePhone: (563)Adam Jensen, JD, CEDS, FLMIVice President and Director of CompliancePhone: (608)Taylor OrtonBenefits AnalystPhone: (563)
32 Evaluating Benefit Plans: How Are We Different? Funding Methods – We have expertise in all funding methods: fully insured, split- funded, minimum premium, self-funded. Most brokers specialize in one funding method.Geographic – We have benefits clients in 30+ states, and Assurex Partners in all 50 states and across the globe. Most brokers concentrate on a small geographic area or one state.Insurance Carrier Relationships – We place business for thousands of clients annually with 50+ insured medical carriers, 25+ stop loss carriers and 30+ life & disability carriers. Many brokers only have a handful of carriers they work with.Strategic Approach – Our team uses a proprietary “3 C’s” approach to evaluating benefit cost drivers and creates custom plans for each client based on company culture, recruiting/retention objectives and budgetary goals. Our team of experts provides creative solutions and outside the box ideas that our competitors don’t think of.Resources – We are truly unique, in that we can provide an integrated “one-stop shop” solution.
33 What We Do That is Different and Below the Surface… Many only focus hereCost per EmployeeBenchmark Plan DesignDependent EligibilityAudit Metrics:CoverageConsumptionCost SharingHealth Care Reform:ImplicationsExchangesPenaltiesBut what’s below the surface?
34 Our “3 C’s” Framework for Evaluating Benefit Plans (on a High Level) MetricCalculationWhat it tells youParticipation RateThe number of employees who are covered divided by the total number of eligible employeesWhether you may be covering too many employees relative to benchmark averagesDependent RatioThe total number of plan participants divided by total number of covered employeesWhether you may be covering too many dependentsCoverageMetricCalculationWhat it tells youAverage claims per ParticipantTotal claims costs (eligible Medical & RX claims) before cost sharing divided by total number of participantsThe total amount of money spent on claims by an average participant without regard to plan design and contributions (absolute cost of benefits)Demographic IndexWeighted average expected cost index based on participant age and gender (1 is average)The impact of demographics on average costsAdmin Cost per ParticipantTotal Plan admin costs divided by total number of participantsThe non-claims cost associated with the planConsumptionMetricCalculationWhat it tells youPlan Cost Sharing percentageThe total amount paid by the plan divided by the total eligible claimsThe split between what the plan pays versus what the employee pays when medical services are purchasedER Contribution percentage(Total plan costs minus employee contributions) divided by total plan costsThe percentage of total plan costs that are paid for by the employerCost Sharing
35 C&B Client Trend Line versus National Average Since 2007, Cottingham & Butler’s clients have experienced a trend of 2.8% increase in cost per employee per year versus the national average of 7.4%.C&B Confidential
36 6 Primary Reasons Why We Perform Differently We focus on strategic planning for long term cost containment. Most brokers ride the renewal rollercoaster and don’t know how to effectively plan beyond the current year.We reach all over, not just locally which gives us a bigger view of the healthcare marketplace and offers alternatives that other brokers may not have access to.We excel with alternative and self-funding arrangements and believe that you should find ways to buy less insurance over time and self-fund the claims that are predictable and controllable.Most brokers focus on off-the-shelf options and have market limitations. We focus on principles and dig for the details below the surface that provide opportunities for savings.We provide wellness recommendations and deliver on our ROI estimates.We focus and deliver on compliance and HR Services making our clients more effective at managing their employees and benefit programs.
37 Differentiators Between C&B and Other Brokers Dedicated Employee Benefits Marketing Team with 100+ market relationships & contractsDedicated Analytics Team (including former BCBS Finance Manager in charge of a 6 state region)ERISA Attorney on staffHR & Compliance Consultants on staffProprietary TPA and PPO NetworksPlan Document specialistDedicated Non-Medical market and plan specialistsACA Experts on staff25+ Nurses and 4 Physicians on staffWellness Consultants and proprietary programming/pricing with Healthcheck360°Transportation Industry Specific BenchmarkingExclusive HRIS/Payroll system capabilities and pricing
38 Client Resources You Won’t Get With Other Brokers… 3-Year Strategy Planning GuideCompliance CD & Quarterly Compliance NewsletterHealth Plan Intelligence Suite (Reporting/Benchmarking Portal)MyWave HR ResourcesPlan Source Benefits Portal for EmployeesOnline Benefit Enrollment Suite*Annual Compliance Manual5500 Filing*Full HR and Compliance Audit Services*Wellness/Benefits Resources on CDProprietary HealthCheck360° programming/pricing*Transportation Industry Specific BenchmarkingHealth Care Reform Tool KitDependent Eligibility & Spousal Coverage Audits available through SISCO** Additional fees may apply
39 Risk Management for Benefits Benefit Compliance AuditCovers H&W benefit plan policies and processes that can put an employer at risk, including the items covered in a DOL H&W plan auditHR Compliance AuditCovers HR policies and procedures that can put an employer at riskEmployee Handbook ReviewIncludes a review of the handbook with revisions to bring the handbook into compliance with applicable law and desired corporate policiesHIPAA Title II Privacy and Security ConsultingPHI mapping, HIPAA findings report, preparation of Privacy and Security policies and procedures, forms, training materials and presentations for staffForm 5500 Preparation/Delinquent Filer Voluntary Compliance ProgramForm 5500s, Schedules, and Summary Annual Report (SAR)DFVC: If your client has failed to file, would they prefer a penalty of:$10/day capped at $4,000 max per plan, or$1,100/day with no limit, going back as far as DOL wantsERISA Wrap-around SPD PreparationIncludes creation of Summary Plan Description containing all the ERISA-mandated elements and required health noticesFailure to provide SPDs and required notices can lead to fines and lawsuitsHint: fully-insured carriers don’t do this because it’s a Plan Sponsor duty and the certificate booklets they do provide don’t contain the required items
40 Best Practices Compensation Review and Benchmarking Includes job description creation/review, marketing/benchmarking positionsCompensation structure analysis and linkage to performance managementBenefit Issue Research & AnalysisGeneric Benefit Form PreparationIncludes eligibility, enrollment, plan administration, plan amendmentsCafeteria Plan PreparationPOP Plan, FSA, Dependent Care, Adoption AssistanceCOBRA AdministrationFMLA Administration
41 Vendor PartnershipsInsurance Carriers: We work with numerous fully insured carriers, stop loss carriers, and voluntary benefit carriersTPAs: For our self-funded clients we work with a large number of different TPA firms and understand the strength of their customer service and claims adjudication processesPPO Networks: We have strong expertise in knowing network geographic area strengths and we can plug in regional networks for strong local discounts.
42 Examples of Details Mattering in the Real World Blue Card FeesC&B engagement uncovered error in Blue Cross service delivery. Client received $550,000 retroactive credit.ACA Risk ManagementReview of client on-boarding procedures reveals significant gap in ability to effectively demonstrate offering coverage to 95% eligible. Exposure- Over $20 million in fines. Result: Significantly enhanced recordkeeping and on-boarding process.C&B engagement correctly calculates ACA fees saving client $109,000 versus carrier recommended method.Insurance PlacementProcurement of two year stop loss contract saves client exposure on seven figure claimant. Result: Cost projections flat.Performance Based Plan DesignClient implemented incentive-based plan design features to promote Wellness and Chronic Condition Medical Compliance.Care Plan Compliance Results:Asthmatics 93%Diabetics 73%Hypertensive 87%Costs are Down 7% over past five years, versus 7% compounded growth.
43 Eligibility AuditsOn average, 4 - 8% of dependent spouses and children on employer sponsored benefit plans are not eligible for the medical benefits they receive.The average cost to the employer for each dependent is $3,500 (per year in claims).A Plan with 1,000 covered employees (1,200 dependents) is likely spending between $150,000 - $200,000 per year on members who do not qualify for coverage.The simple fact is that employers can no longer afford to overlook ineligible dependents.As indicated above, 5 – 15% of covered dependents DO NOT QUALIFY for the benefits they receive! There are two primary reasons:As we discussed, over time, the intent and the enrollment procedures which safeguard the Plan have been diluted. Enrollment becomes automatic and ongoing eligibility is not monitored.Payors will not manage the census. They quietly assign this duty to the employer… The employer assigns it to the member who is unaware of their responsibility to interpret the eligibility of their dependentsThe exposure this creates for them employee is unacceptable, the costs assumed by the Plan are not sustainable.
44 Importance of Voluntary Benefits As employers consider their health care and total rewards strategies in light of health care reform, nearly half expect voluntary benefits and services (VBS) to become more important over the next five years jumping to 48% in 2018 from the current 21%.These supplements to core benefits are designed to fill gaps in employees' security, health, wealth accumulation and address unique personal needs.The most prevalent voluntary benefit offerings currently provided by employers include life (94%), vision (84%), disability (80%), dental (80%) and accident (68%) insurance.Additionally, employers are considering adding a number of voluntary benefits over the next two years. The top offerings being considered include critical illness, identity theft and financial counseling.Towers Watson 2013 VBS Survey
45 Additional Broker Resources Educational Employee Benefit Webinar and Seminar SeriesHR Communication Portal which includes documents for employers and employeesEmployee Benefits Website to share benefit plan informationBenefit Booklet Content and Design Creation
46 Your ResourcesContact Jane Mueller & Nicole Pfeiffer with employee benefit prospects: Jane Mueller | Vice President Employee Benefits | Nicole Pfeiffer | Vice President Employee Benefits |
49 Subsidiary of medical management firm HealthCorp About HealthCheck360°Created in 2007 to change focus of wellness industry to health risk managementSubsidiary of medical management firm HealthCorpNatural evolution of 20+ years of experience in:Health improvement and behavior changeChronic condition managementManaging over 100,000+ employee livesProprietary & Confidential
50 Average group size – 300 employees Domiciled in 36 states About Our Client BaseAverage group size – 300 employeesDomiciled in 36 statesMultiple IndustriesManufacturingProfessional ServicesHealth CareTransportation/ Distribution
53 2. Proprietary Objective Scoring System Our scoring algorithm is directly correlated to present and future cost driversBalanced across all major cost driversTransparent to participantDesigned to reward positive change across health spectrumDesigned to integrate with medical managementEasily understood scaleDeveloped and reviewed by physiciansProprietary & Confidential
54 3. Outcome Based Incentive Models Incentive RateHealth score of 71+Repeat participants with <71 AND 5+ pt improvementAll new participantsStandard RateNon-participantsParticipants who fail to meet health goalsPreferred RateHealth score of 71+Repeat participants with <71 AND 5+ pt improvementAll new participantsParticipation RateParticipants who fail to meet health goalsStandard RateNon-participantsOR…
55 4. Data Driven Engagement and Programming BiometricsHRA responsesDemographicsClaimsStratificationIdeal, Low, Moderate, High, & Very High RiskEngagementCommunicationsTechnologyHealth CoachingMedical MgmtProprietary & Confidential
56 5. Client Specific Reporting Individual ReportExecutive & Aggregate ReportClaims analysis*Health Coaching Reporting*Risk Migration AnalysisCritical Value ReportingExecutive Review PresentationProvides synopsis of various reportsIdentifies key issuesCompares company data to industry cohorts* If applicableProprietary & Confidential
57 Importance of Participation 18% Increase in non-participant costsHC360 Sample Population Study, N=10262, 2012Proprietary & Confidential
58 Continued Positive Impact Each dot represents at least 1,000 lives.Data integrity: 95% confidence interval that for any size population the margin of error is +/-2%
59 Correlation to Health Score to Claims HC360 Sample Population Study, N=10262, 2012
60 HealthCheck360° Case Study 2000 EE manufacturing and distribution company – Significant correlation in high health risk levels and workers compensation expense.
61 Year 1 to Year 4 MigrationHealthCheck360 Population Study, N=19,301, 2012.