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Scott R. Baldwin Area Senior Vice President, Education Managing Partner

Negotiation Trends and Employee Benefits... A Total Compensation Approach. Scott R. Baldwin Area Senior Vice President, Education Managing Partner Gallagher Benefit Services, Inc. scott_baldwin@ajg.com 630.285.3755.

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Scott R. Baldwin Area Senior Vice President, Education Managing Partner

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  1. Negotiation Trends and Employee Benefits... A Total Compensation Approach Scott R. Baldwin Area Senior Vice President, Education Managing Partner Gallagher Benefit Services, Inc. scott_baldwin@ajg.com 630.285.3755

  2. Employee Benefits & Negotiations • 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

  3. Employee Benefits & Negotiations • Bargaining Team Education • Common Body of Information • Benchmarking • Plan Modeling • Contribution Modeling • Plan Migration • Total Compensation • Wellness and Consumerism • Healthcare Reform 2012 – 2018

  4. Average District Plan Design * Based on internal GBS data. Sample size of 140 Illinois School Districts

  5. Cost of Coverage: Monthly Premium Increase over the years(Medical Inflation costs average 9% to 11%)

  6. Cost of Insurance Coverage:$10,548,732 per year

  7. How do our premiums compare to others?(From a survey of 145 Northern Illinois school plans)

  8. Contribution Structure • 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

  9. Healthcare Reform 2012 - 2018 • Administrative Impact • Financial Impact • Plan Design Side Effects

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

  11. Administrative Impact on Schools • 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

  12. Financial Impact on Schools • Plan Design • Common School District Plan Designs • Cadillac Tax implications • “Optimal” plan design • Contribution Strategies • Plan Migration • Penalties/Fees • Incentives • “Optimal” contribution strategy

  13. Plan Design Side Effects • 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

  14. Wellness Programs • 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.

  15. Wellness Programs • 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 * Baicker, K., D. Cutler, and Z. Song. "Workplace Wellness Programs Can Generate Savings." Health Affairs 29.2 (2010): 304-11. Print.

  16. Wellness Programs • 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

  17. Consumer Driven Healthcare • 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

  18. What are we driving toward?

  19. What the Future Might Look Like • Plan Design • Contribution • Consumerism • Reporting and Compliance

  20. Bargaining to the Future • 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

  21. Q&A

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