Scott R. Baldwin Area Senior Vice President, Education Managing Partner Gallagher Benefit Services, Inc Negotiation Trends and Employee Benefits... A Total Compensation Approach

 Role of Insurance/Employee Benefits ◦ Relationship to Negotiations ◦ Yesterday…Today…Years to Come ◦ Integrated? ◦ Total Compensation?  What is current environment? ◦ Insurance Committee? ◦ Representation to Bargaining Team?  Is there Common Ground? ◦ Communication of Value 2

 Bargaining Team Education  Common Body of Information  Benchmarking  Plan Modeling  Contribution Modeling  Plan Migration  Total Compensation  Wellness and Consumerism  Healthcare Reform 2012 –

4 ProvisionBenefit Level Deductible$400 OOP Maximum$1,250 Co-insurance90%/70% (in/out) Office Visit Co-pay$20 (58% of plans) Rx – Generic$10 Rx – Formulary$25 $30 (mail-order) Rx – Brand$35 * Based on internal GBS data. Sample size of 140 Illinois School Districts

 What are districts doing today? ◦ Typical arrangements ◦ Typical bargaining strategy  What are the dangers? ◦ “Affordability” and the exchange ◦ Impact of plan migration  Is there an optimal plan design? ◦ Short and long term strategy 8

 Administrative Impact  Financial Impact  Plan Design Side Effects 9

10 OTC drug reimbursements HSA penalties W-2 Reporting Employee notification requirements OTC drug reimbursements HSA penalties W-2 Reporting Employee notification requirements Medical industry taxes FSA limits Itemized medical expense deduction changes Medicare taxes Part D drug subsidy deduction eliminated Medical industry taxes FSA limits Itemized medical expense deduction changes Medicare taxes Part D drug subsidy deduction eliminated Coverage expansion mandates Patient protections Coverage expansion mandates Patient protections Early retire reinsurance High-risk pools Early retire reinsurance High-risk pools Employer and individual mandates Insurance exchanges Patient protections “Cadillac” excise tax (2018) Employer and individual mandates Insurance exchanges Patient protections “Cadillac” excise tax (2018) W-2 Reporting Plan disclosure requirements W-2 Reporting Plan disclosure requirements

 Communication Requirements ◦ Educating Employees about Options ◦ Standardized Communication Practices  Data Collection Requirements ◦ W-2 Reporting ◦ IRS/HHS Communication Requirements  Benefits Changes ◦ “Grandfathered” Status ◦ FSA restrictions ◦ Preventative Services ◦ Annual/Lifetime Limits 11

 Plan Design ◦ Common School District Plan Designs ◦ Cadillac Tax implications ◦ “Optimal” plan design  Contribution Strategies ◦ Plan Migration ◦ Penalties/Fees ◦ Incentives ◦ “Optimal” contribution strategy 12

 Higher costs ◦ Compounded over time  “Cadillac Plan” tax implications ◦ 2018 limits - $10,200 for employee only and $27,500 for family  $5,280 and $14,235, respectively, in today’s dollars ◦ 40% excise tax on additional dollars spent  $125,000 penalty for a 250 employee district with an average plan  Is there an optimal plan design? ◦ Short and Long Term Strategy 13

 A “Wellness Program” is an employer effort to reduce long term medical program costs and decrease absenteeism by engaging employees in disease management and health promotion strategies. 14

 Wellness ROI ◦ $3.27 reduction in medical costs per dollar spent* ◦ $2.73 reduction in absenteeism costs per dollar spent*  Incentives allowed under Healthcare Reform ◦ Allows 30% cost of coverage discount for program participants  “Discount” rather than “Surcharge”  Carrot vs. Stick Approach  Drives participation 15 * Baicker, K., D. Cutler, and Z. Song. "Workplace Wellness Programs Can Generate Savings." Health Affairs 29.2 (2010): Print.

 Developing a Culture of Wellness (and realizing ROI) ◦ Monitor Participation  ROI maximized with 70%+ participation ◦ Invest in your program  1-2% of Claims Costs ◦ Create an active Wellness Committee  Drives the message to employee population  Encourages a “Culture of Wellness” ◦ Set long term goals, and drive toward them  Every “wellness” activity should drive toward those goals 16

 Health Savings Account (“HSA”) Programs ◦ What are they? ◦ How do they benefit the District?  Trend Management  Lower Plan Costs ◦ How do they benefit Employees?  Flexibility and Control  Become an Engaged and Educated Consumer 17

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 Plan Design  Contribution  Consumerism  Reporting and Compliance 19

 Where you are today along with local factors will drive how you proceed.  Consider bigger strategic questions such as whether to continue to offer health insurance or to have employees access it through the exchanges.  Remain current on regulations, trends and new legislation.  Educate…Communicate…Negotiate 20

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