Defined Contribution Strategies Using Private Exchanges A Case Study Barbara M. Watters Vice President, Human Resources February 21, 2013

 A multi-generational family business founded in  Grown organically and through acquisitions from 1 location in Minneapolis, MN to 104 in 21 States.  Ford and GM’s largest wholesale distributor of aftermarket Original Equipment (OEM) parts  Serving the Mid-west, Mountain, West including Alaska and Southwest regions along with select products in other markets and overseas. “A Forever Company” Factory Motor Parts Company

Over 2,000,000 sq ft of Warehouse Delivery Vehicles Sales Professionals - 35 Location in Locations in 2012

A Growth Implication for Human Resources: Need Competitive Rewards Strategy Recruit, Attract and Retain Our Challenges: Industry with thin margins Wage & Benefit Cost Control Critical Competition = Large Public Employers Competitive Variations in hire markets Attractiveness ? -Had 1 HD plan design BUT Keep Costs and ROI

Additional Challenges Leadership Team –The Message: Provides cost predictability with EE satisfaction & market competitiveness. Communications – 2000 employees/21 States Employee Diversity- Age, Ethnicity, language, geography, education, experience, incomes. Limited Computer Access – or familiarity Lack of Education/Experience- Little knowledge of plan designs; no experience with choices. Outside support CRITICAL. Cumbersome Enrollment Process- (paper & automated) Structuring ER Contribution- To be competitive but not cause large migration.

Solution ? A Defined Contribution Strategy in 2012 Predictable Spend for Company …. full suite of Competitive Plan Options and costs for my employees ! Chose from 10 Plans on exchange with an array of plan designs. Chose 3 employer contribution levels – EE/EE+1/Family with careful consideration to minimizing employee migration to Plan. Self-insured to fully insured for inaugural year; more built-in benefits Minimal disruption of existing providers with change in networks; overall increase in provider network nationally. Opportunity to reduce employer spend by 8-12%

No organic increase in enrollment or level of choice Employer spend reduced Employee visibility to spend – seen as “additional pay”. EE’s very positive to having choices that fit them! EE’s saw better options for them at less cost than HD Plan. Attractive to recruits; + retention effect. Enrollment: 68% Web Tool 32% Call Center EE increased satisfaction with Medica provider networks & service in many geographic areas Defined Contribution Strategy- The Results

Year 2: 2013 Defined Contribution Strategy Made Voluntary Increase in employer contribution/spend of 8.5%. Plan designs remained constant – EE’s very happy with the choices. Added Medica’s Choice Passport ACO network of providers as option for 11-county Twin Cities’ Metro area. Changed HRIS and implemented its’ benefit on-line enrollment functionality. Medica Customer Call Center for plan enrollment support was big plus.

Defined Contribution Strategy with My Plan by Medica Conclusion Predictable Spend Cost Savings Administrative Support Employee Satisfaction Flat $ fixed cost for health spend per EE Ability to offer competitive choices to EE’s and recruits with no administrative hassles. 10% cost decrease in 2012 vs with increase in benefits. Positioned for spend control going forward. Dedicated Call Center & web decision tools that provide EE’s an unbiased, user friendly experience - thus minimizing my HR staff time. Popular Health Plan Options for all EE types, regardless of location. ACO definite + Medica/UHC network - a value -add nationally EE’s can choose by purse and individual needs EE’s appreciated the transparency, support & the empowerment of choice.