LOCKTON ALIGNS CLIENTS’ BUSINESS AND HEALTH PLAN OBJECTIVES
August 2013
L O C K T O N C O M P A N I E S
STRATEGIC THINKING AND CONSULTING
A Kansas City Benefits client approached Lockton with the
challenge of aligning their business objectives with their
employee benefits plan. Their business objectives included:
� Control costs and reduce employer liability.
� Increase accountability among employees.
� Evaluate the impending impact of health reform.
To design a health plan that integrated cost containment,
accountability, and affordability, Lockton established a course of
action by engaging many teams, including the Lockton Health
Risk Solutions® team and Benefits Analytics team.
Kristi ScottMarketing Assistant
AUTHORS
Brent SimmonsVice President Unit Manager816.960.9868
CLIENT PROFILE
� Privately owned group of information services, publishing companies
and educational institutions
� More than 2,100 employees
� More than 70 offices worldwide
2
Redesigning Plans Focused on Affordability
To manage overall cost and maintain the employer/employee ratio goal, Lockton evaluated various plan designs the client could adopt to control the following cost drivers:
� Inflationary trend
� Health reform h Assumed 5 percent increase to overall plan costs by losing
grandfather status
h Assumed a 1.4 percent increase for comparative effectiveness research tax and high-risk reinsurance tax.
� Employee health savings accounts (HSAs)
� Wellness plan incentives
Based on employer-specific request for information and benchmarking data, Lockton’s teams created a high and low consumer-driven health plan (CDHP), a new preferred provider organization (PPO), and 60 percent plan (to pass qualifying coverage test for heath reform requirements). Initially, the client wanted to consolidate and offer one CDHP plan, but Lockton’s predictive modeling showed that eliminating PPOs was not cost-effective or competitive among their industry.
Lockton provides advice, acting as a trusted business advisor to the client, articulating a compelling vision,
seeing the bigger picture, and developing appropriate strategies to meet challenges ahead.
WHAT IS STRATEGIC THINKING AND CONSULTING?
RATIO GOAL
When designing the new plans, it was
important to ensure the employee
and employer cost shares remained
consistent with the previous year’s
ratio.
01/01/13 EMPLOYEE COST SHARE WITH NO PLAN CHANGES
Contributions 21.9%
Combined44.1%
Plan Design 22.3%
Contributions 21.9%
Combined44.1%
01/01/14 EMPLOYEE COST SHARE UNDER NEW PLANS
Contributions 22.5%
Combined45.1%
Plan Design 22.6%
Contributions 22.5%
Combined45.1%
August 2013 • Lockton Companies
3
$220,000 annual savings in employees’ HSA contributions and still competitive
Reducing the client’s HSA liability, while not eliminating a benefit, was a main concern at this stage of the strategic planning process, as was driving enrollment to the low CDHP plan. Lockton created a plan that addressed both objectives: Offer two different levels of HSA seed contributions based on plan choice. If employees chose the low CDHP plan, they received seed contributions of $750 per employee or $1,500 per family (the current employer seed level). If employees chose the high CDHP plan, they received seed contributions of $500 per employee or $1,000 per family. With this strategy in place, the client could save approximately $220,000 in seed contributions annually, lower their HSA liability, drive their employees to enroll in the low CDHP plan, and remain competitive in their industry.
Wellness Plan Focused on Accountability
To encourage consumerism of the newly designed plans, the Lockton Health Risk Solutions® team created a wellness plan that would manage participation and increase accountability and engagement among employees. The team partnered with a wellness vendor to execute six key strategies:
1. Transition to a comprehensive program.
2. Use data integration and analytics to address controllable lifestyle health claims.
3. Offer meaningful incentives for employees.
4. Develop a timely and effective communication strategy to educate employees.
5. Encourage senior leadership support.
6. Create a supportive culture and environment.
4
Silver
$20 per month premium differentialSilver
During the client’s first year of implementation, Lockton created a baseline health measurement report in InfoLock® by collecting employee data through health risk assessments (HRAs) and biometric screenings to identify key employee risk factors. The incentive-based strategy included a four-status engagement cycle: bronze, silver, gold, and platinum.
The plan incented employees to engage in healthy behaviors by awarding them points based on positive biometric outcomes, online health education, participation in disease management programs, fitness activities, and more. The more accountability employees took toward improving their health, the more points awarded to the employees—ultimately determining their level of engagement in the program and their premium contributions.
PREMIUM DIFFERENTIAL BASED ON ENGAGEMENT LEVEL FOR 2013
Platinum
$40 per month premium differentialPlatinum
Gold
$30 per month premium differentialGold
August 2013 • Lockton Companies
5
Change Takes Time
After the first year of implementation, the Lockton Health Risk Solutions® program revealed some early success. After comparing the incurred claim period before introducing the wellness plan versus the first year, paid claims decreased 52 percent among employees who were engaged in the wellness plan and achieved silver status or higher. Those with $0 paid medical or pharmacy claims decreased 50 percent.
The first year also presented challenges that the client needed to overcome in future years—mainly increasing gold and platinum engagement statuses. To increase engagement, Lockton suggested that the client adjust the premium differential for achieving platinum status and recommended more targeted communication.
52%decrease in paid claims
50% decrease in those with $0 paid medical and pharmacy claims
Cambridge Information Group-Year 1* As of September 30, 2012
48%
38%
13%
3%
0%
10%
20%
30%
40%
50%
60%
Cambridge Information Group
Blue/Bronze Silver Gold Platinum
757 593 198 49
40%
20%
35%
5%
• Incentive• Silver - $20 / month premium differential• Gold - $30 / month premium differential• Platinum - $40 / month premium differential
2012 Goal
56
2012 ENGAGEMENT RESULTS
Silver
$10 per month premium differentialSilver
Platinum
$40 per month premium differentialPlatinum
Gold
$30 per month premium differentialGold
PREMIUM DIFFERENTIAL BASED ON ENGAGEMENT LEVEL FOR 2014
6
Communication Is Key
With the many changes facing the client’s employees, a cohesive and well-thought-out communication plan was critical to the new plan’s success. Below is a snapshot of the client’s communication calendar designed by Lockton:
Target Date Activity/Task
January Wellness vendor webinars/monthly campaigns: physical activity
February Wellness vendor webinars/monthly campaigns: heart health
March Wellness vendor focus groups
April Roll out client mobile app to employees
May 401(k) financial education meetings and webcast
June Health reform employee education communications
July Buy-up plan design strategy targeted employee communication
AugustExecutive memo: quarterly wellness plan status report of progress toward companywide goal, highlight successful employees
September Mail an incentive requirements postcard/letter to employees’ homes
October Hold open enrollment meetings
November On-site biometric screenings
December Wellness vendor webinars/monthly campaigns: staying healthy during the holidays
To make doctor visits
and understanding their
coverage easier, Lockton
created a mobile app for
the client’s employees
to download to their
smartphones. The app
included employee’s
personal plan information,
including contact
information for providers,
customer service, nurse
lines or websites, and the
ability to photograph and
house their ID cards in one
place.
LEVERAGING TECHNOLOGY
August 2013 • Lockton Companies
7
Lockton Strategic Thinking and Consulting at Work
Through strategic thinking and consulting, the client is well on its way to creating a culture of wellness, both financially and health-related. Lockton’s teams successfully limited the client’s financial liabilities and increased employee plan accountability and affordability, while factoring in the imminent health reform laws and regulations.
Plan Designs
Employer HSA Seed
Wellness Engagement Incentives
Employee Contributions
Wellness Engagement
Levels
Enrollment Migrations
New Health Plan Strategy
CLIENT SERVICE TEAM
BENEFITS
ANALY
TICS T
EAM
CLIEN
T
LOCKTON HEALTH RISK
SOLUTIONS ® TEAM
Our Mission
To be the worldwide value and service leader in insurance brokerage, employee benefits, and risk management
Our Goal
To be the best place to do business and to work
www.lockton.com
© 2013 Lockton, Inc. All rights reserved. Images © 2013 Thinkstock. All rights reserved.
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