Defined Contribution Strategies Using Private Exchanges

A Case Study

Barbara M. Watters

Vice President, Human Resources

February 21, 2013

Factory Motor Parts Company

   

A multi-generational family business founded in 1945. 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”

- 35 Location in 2001 - 104 Locations in 2012 Over 2,000,000 sq ft of Warehouse 700 + Delivery Vehicles 400 + Sales Professionals

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%

2012 Defined Contribution Strategy The Results

• • • • • • • • 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.

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. 2011 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.