HOW DO YOU CHANGE YOUR PLANS TO MAKE THEM AFFORDABLE TO BOTH EMPLOYEES AND EMPLOYERS? FEI BOSTON PROFESSIONAL DEVELOPMENT SESSION SEPTEMBER 12, 2014 Liz Spath Principal Employee Health & Benefits - Boston

Agenda Strategies toward successfully adjusting to ACA requirements Private Exchanges Plan design and eligibility strategies Getting ready for the data mandates Planning ahead for 2018 excise tax – strategic use of wellness plans

Key Issues Converge to Reshape Benefits Strategy Continued Cost Pressure Costs Employers spend close to 8% of total comp on healthcare, up from 6.6% in 2004* Cost pressures increasing, expect shift from public to private sector 10%+ savings possible Healthcare Reform Compliance & Costs ACA taxes, minimum benefits, coverage requirements, etc. 40% of companies have a plan that will exceed excise tax thresholds in 2018 40% excise tax on costs that exceed 2018 thresholds: $10,200/single and $27,500/family Employee Consumerism Employee Choice Diverse workforce demanding more choice, greater support in decision- making Employees seek choice against limited options and employer-managed budgets $4T 2000 2005 2010 2015 Health Care Costs Shifting Responsibilities $4T Employers Individuals 2000 2005 2010 2015F * Source BLS

What a Well Run Private Exchange Accomplishes Enables ongoing ability to bend the cost trend Improves service quality Offers high touch customer support Allows for flexibility with ability to pivot over time (no “lock in”) Leverages flexible, scalable technology

Right-sizing: Mercer Marketplace Results $800 Per-employee cost reduction from right-sizing benefits Availability of Supplemental Benefits Support Right-Sizing 24% Of all employees bought supplemental health 35% Of employees electing $1,500 or $2,500 deductible medical bought supplemental health

Non-Medical: Mercer Marketplace Results Active marketing of all lines of coverage 9.4% Average savings for LAD benefits offered via Marketplace Aggressive carrier bids Multi-line discounts Note: Results vary by client

Top Three Reasons for Employer Adoptions of Mercer Marketplace Simplified plan management #1 Reason – 33% Expanded and comprehensive employee choice #1 Reason - 15% Immediate and/or future cost savings #1 Reason - 24% Note: Reflects % of early adopters ranking reason as a significant factor in their decision to move to Mercer Marketplace; for most clients, more than one reason played a significant role.   

ACA Reporting Begins in 2016 (For 2015 Data) Purpose and Types of Reporting Employer mandate: Did the employer offer the requisite coverage to avoid assessments? Individual mandate: Did the taxpayer have the requisite coverage? Public exchange premium subsidies: Should IRS claw back any premium subsidy taxpayer got last year? May taxpayer claim premium subsidy for any months of last year? Minimum Essential Coverage* (§6055) Minimum Essential Coverage* (§6055) IRS Filing Include all covered individuals enrolled in MEC. Individual Statements to each “responsible individual” who enrolls self or others in MEC IRS Filing Include each full-time employee Individual Statements to each employee who was full time for at least 1 month during reporting year. * No small employer exemption.

What Are My MEC and Shared Responsibility Reporting Requirements? 4 What Are My MEC and Shared Responsibility Reporting Requirements? 1094-C Transmittal Form 1095-C Employee Statement Employer IRS Information Return 1094-B Transmittal Form 1095-B Employee Statement Insurer IRS Information Return Self-Insured Employers Fully-Insured Employers Employer reports both MEC (6055) and ESR (6056) information on a single employee statement 1095-C. Insurer will provide MEC (6055) information on Form 1095-B. Employer will provide ESR (6056) information on Form 1095-C. 1094-C Transmittal Form 1095-C Employee Statement Employer IRS Information Return

The Role of Wellness Knowing and Adopting Best Practices When Wellness Fails… You think one size fits all You address the needs of the disease and not the person You have a myopic ROI approach You fear bad press Targeting Success… Tailored Relevant Timely Simple

Best Practices Better Answers. Key Questions  Plan Design Is our cost sharing approach tracking?  Program Participation Are enough of the right people participating in our programs?  Health and Lifestyle Risk Have there been changes in health or lifestyle risks that are driving our costs?  Lifestyle Risk and Compliance Has there been a reduction in the number of modifiable lifestyle risks and an increase in compliance among program participants? What’s driving our trend? Are our programs working?  Unit Cost and Intensity Has the price of health care services changed? Is the intensity of the units of service increasing?  Illness Burden and Disease Prevalence Have there been appropriate changes in illness over time?  Utilization Are our members’ utilization of services increasing, decreasing or shifting to contribute to our costs?  Cost What is the relationship between cost and program participation?