October 1, 2009

1. Planning for Success and Lessons Learned – Introducing Consumer Driven Health Plans into the University Environment Renee Hiller, Michigan Technological University Janet M. Vermeulen, Aon Consulting October 1, 2009

2. Topics for discussion • Background on process and decisions • Communications strategy • Lessons learned

3. In May 2000, a Benefits Liaison Group (BLG) was created at Michigan Tech as an advisory group. Their mission was to advise the University leadership on providing the best possible fringe benefit program within the available resources. Membership consisted of key professional staff and University Senate representatives.

4. Philosophy of the BLG has been and continues to be “a shared responsibility on the cost containment/ reduction with University employees and communities.”

5. Starting in February of 2001, one of the BLG’s goals was to “shift employees from unaccountable consumers into the role of informed consumers with the tools to plan and manage their own health care.”

6. In other words . . . • Emphasize prevention and effective health management • Prevent wasteful health care spending • Move from paternalism to individual accountability • Assure the flexibility to meet the needs of a diverse workforce • Varying ages and lifestyles • Provide comprehensive protection to the seriously ill

7. In other words . . . (continued) • Provide employees with all of the tools necessary to make good decisions • Assure access to important providers • Much care occurs in Minnesota, Wisconsin and other states • Improve reporting to the BLG and the University

8. Each year fringe benefits plans have been reviewed by the BLG. For 2009, the BLG was asked to create one or more scenarios for reducing Michigan Tech’s fringe rate for regular employees to 34-36% while being cost-neutral to the University and without impacting total compensation to employees. This will require shifting compensation from benefits to salary.

9. Identify viable carriers • Analyze financial impact of discounts • Solicit competitive quotes • Services • Reporting • Consumerism capabilities • Analyze impact on employees • Financial disruption • Network fallout • Provider disruption • Network development • Design appealing plan • Basic plan design • University funding level and approach • Set contribution strategy appropriately BLG’sProcess

10. Critical considerations in selection • Integrated approach • Consumer tools • Cost and quality data • Plan selector tools • Prescription drug analysis tools • Basic medical information

11. Finding the right plan vendor • Identifying viable vendors • Some of the work was done in 2007 • Database that matches zip codes of employees to available vendors, showing quality of match • Reviewed all major vendors • Blue Cross Blue Shield and Aetna were the only vendors with a viable network in the Upper Peninsula of Michigan • Analysis did not create compelling case for change • Solicited new quotes in 2008 from viable vendors • Performed discount analysis • Aon maintains a discount database which stores claims of all major vendors • Includes charges and approved amounts • Data refreshed every six months 11

12. PPO Availability Report 12

13. Vendor Discount Analysis 13

14. Measuring impact on employees 14

15. Measuring impact on employees • Reviewed specific providers • Specialty care migrates to Wisconsin and Minnesota • Mayo Clinic was crucial provider • Several other providers reviewed • Expansion of footprint of Michigan Tech • Research locations can be anywhere in the United States • Retirees are in all areas • Required a national solution • Targeted provider recruitment • Michigan Tech is major employer in their geography • Vendor committed to provider recruitment 15

16. Design an appealing plan • Consolidated from six plans down to two • Standard PPO with deductible vs. previous PPO with no deduction (premium plan) • High deductible health plan with HSA • University funded 50% of deductible • Low out of pocket maximum • Specific intent to have consumer driven plan be preferred plan • Actuarial relative value differential between plans less than 4% • Relativities hold up over three years • Plan selector training for employees and their families • Tools available at Aetna website 16

17. Plan designs

18. University funding of HSA • Decision was to fund 50% of deductible • Structured as a transitional contribution • 2/3 went in on January 1 to meet immediate medical needs • Additional 1/3 goes in on July 1 • This has not been committed to as an ongoing approach • Future years may make more sense to be structured as matching contribution or other approaches • Employee has opportunity to fund additional dollars on a tax preferred basis • Funds are contributed pre-tax • Accumulation is non-taxable • As funds are withdrawn, non-taxable as long as for qualifying medical expenses • Potential as a funding option for retiree medical expenses

19. Revised contribution structure • Consumer-driven plan provided as the plan with no payroll contribution • Cost sharing on standard PPO plan set at 10% of funding rates • Best case anticipated participation at 25% showed 4% savings from the status quo • Actual enrollment at 39%; expected savings of 5% to 6% • Savings were built into salary structure with a compensation shift

20. Results of the Redesign • Plans are on budget through August 2009 • Employees are saving their own funds at a rate of ~$70,000 per month • - $163 per enrolled employee per month • Average account balance just under $1,000 • Employee acceptance has been enthusiastic • BLG remains committed to concept

21. Plans for 2010 • Minor plan design changes • Expectation is for single digit trend increase • Adjustment to premium cost sharing • - Increase PPO somewhat • - Continue no contribution on HSA plan • Same HSA contribution approach • Re-communicate • - Repeat a very robust communication campaign • - Build on the base of employee knowledge

22. Communication Strategy

23. Original announcement of changes delivered in October by University President, Glenn Mroz • Packets of written materials delivered to all employees • Supported by daily email communications with regard to questions and issues • 18 campus forums were held to discuss the new health insurance plan options • Employees were encouraged to attend multiple sessions • Varied schedule to accommodate all employees

24. 5. A website was developed to aid the employees in making educated choices http://www.admin.mtu.edu/hro/TechSelect/index.shtml • After the enrollment period was completed the communication process continued with follow up clarification, FAQs and other support • One on one consultations for specific employee questions were also available • Communication continues throughout this first plan year as employees become familiar with the new plan structure

25. Much of the communication material is available at : http://www.admin.mtu.edu/hro/benefits/ Samples of the materials are available for review after this presentation

26. Lessons Learned

27. Scrutinize and clarify every detail during implementation Even if you think you know what they’re saying, confirm Set the stage for continual change Provide good plan selection guidance in a variety of formats Consider using a local financial institution for HSAs

28. Have a thorough understanding of how services are currently covered Eases maintaining continuity of coverage of services Balance contributions to the relative value differential of the plans (if multiple are offered)

29. Enrollment Results

30. Initial enrollment of 39% of active employees into the HSA plan Heavy enrollment among families, including large families Reduced overall gross costs by 5% to 6%

31. Enrollment patterns

32. Key outcomes: 1. Increase compensation/benefit flexibility so employees at different life stages, with different family situations and different times to retirement can best meet their personal needs.

33. 2. Shift compensation from fringe benefits to salaries, with a long-term goal of reducing fringe benefit rate from the current 45.2% to between 34% and 36%, a rate similar to other Michigan and national universities. As a result of these changes, current fringe rate was reduced to 42.6%.

34. This action also helped Michigan Tech compete with other institutions in achieving the first strategic goal: “to attract and retain world-class faculty, staff, and students.”

35. Questions and discussion Renee Hiller Michigan Technological University 1400 Townsend Drive Houghton, MI 49931 (906) 487-3309 rlhiller@mtu.edu Janet M. Vermeulen Aon Consulting, Inc. 3000 Town Center Southfield, MI 48075 (248) 936-5477 Janet_Vermeulen@aon.com