Joe Barber, New YorkMark Harris, London

CHARTING YOUR COURSE FOR GLOBAL EXPANSIONMANAGING EXPATRIATE MEDICAL PLANS

APRIL 10, 2014

MERCER WEBCAST

MERCER

Joe BarberNew York

Mark HarrisLondon

Today’s Speakers

MERCER

The ChallengeSupporting Strategy Through Targeted Engagement

Challengesfaced by

employers

2

Improvingsatisfaction

Supporting employeeservice requirements and

exceeding employerobjectives

Double-digitcost increase

Impact of inflation andfixed administration

charges

Compliancewith regulation

Home and host countryimplications

Benefit DesignEmployee perceptionversus premium cost

MERCER

Today’s Objectives

3

Rememberno one size

fits all

Share experiences Understanding currentand future opportunities

Answer your questions

MERCER

BENEFIT DESIGNEMPLOYEE PERCEPTION VERSUS PREMIUM COST

MERCER 5

Expatriate Medical Benefits

Employeeengagement

and satisfaction

Cost control Providingcompetitive

benefits

Top priorities of employers for their expatriate medical plans

Source: Benefits Survey for Expatriates and Globally Mobile Employees

MERCER 6

Challenge: How can organizations control cost and improve qualityand satisfaction?

Market PositionInfluencing Factors

Consultations20-25%

Prescriptionmedicine15-20%

Variedhealth profiles

by country

Diversehealthcaresystems

Maternity claims15%

Diagnostic tests15-20%

Regulation andminimum benefit

levels

Impact ofmedicalnetworks

MERCER 7

Plan DesignBenefit Options – Employee Perception Versus Premium Saving

Source: Benefits Survey for Expatriates and Globally Mobile Employees

MERCER 8

Impact of Benefit ChoicesLonger Term Impact of Benefit Changes

• Interactive modelingcapabilities

• “Real time” assessment ofimpact of various medicalbenefit strategies

• Flexible inflationary factorsbased on regional andspecific client performance

• Impact of legislative v’smarket benefit trend mapping

• Five-year financial forecasts

MedForecastTM

Typical design plan strategies includecapping maternity cover, managing areaof cover, incorporating cost sharing suchas deductibles

The chart displays the impact of your selected strategy. The greenbars show your expected costs for the next five years if you makeno changes. The red line represents your ideal state. The blueline shows the expected impact of the hypothetical changes.

MERCER 9

Compliance with RegulationInfluence of Home and Host Country Dynamics

• Government health budgets under pressure• Typically expatriates are caught up in domestic reform• Requirement for minimum levels of medical benefit

• Government health budgets under pressure• Typically expatriates are caught up in domestic reform• Requirement for minimum levels of medical benefit

Increasing trend towards admitted insurance locally, which is acceleratingIncreasing trend towards admitted insurance locally, which is accelerating

• Brand reputational risks• Assignment continuity issues• Financial penalties

• Brand reputational risks• Assignment continuity issues• Financial penalties

Major issue for many multinational companiesMajor issue for many multinational companies

Areas of concern include Middle East, Australia, and US healthcare reform…Areas of concern include Middle East, Australia, and US healthcare reform…

MERCER 10

Benefit DesignCase Study – Working with Global Mobility, Rewards and Procurement

• Population in multiple regions – Asia, Europe,Middle East and North America.

• Mix of expatriates covered under one level ofbenefit

• Rising premium costs.• Diverse regulatory frameworks• Limited access to data• Impact of multiple country healthcare systems.

• Regional benefit gap analysis• Modelled claims behaviour based benefit choices.• Review of regional carrier solutions versus one

global carrier approach.

• Segment expatriate employees based on region.• Establish regional contracts managed through one

overriding master agreement.• Create claims pool by region and one consistent

administration charge.• Implement framework to implement local plans.

Situation – Global plan, centralized throughone location

Challenges – Increasing costs and rise in regulation

Action – Segment employees based onregional benefit practice

Result – Separate admitted contracts through oneCarrier , leveraging economies of scale

MERCER

IMPROVING SATISFACTION

MERCER

Services You Should ExpectCore Versus Value-add

SERVICES

Integratednetworks

Host countrydirect

settlement

Re-imbursement

in multiplecurrencies

Onlineclaims

submissionand tracking

Onlinecommunication

portal

Homecountrydirect

settlement

24/7 helplineservices

Integratedclaims

managementinformation

Broadbenefit mix

Licensefootprint

Access tolocal carrier

rep’s

Governance• Compliance• Design• Communication• Administration• Vendor

management• Service level

agreements

Considerations

12

MERCER

Moving to Integrated Service Models

Regulation

DataCommunication

IntegratedExpatriate

MedicalPlan

CarriersPartners

Networks

Current situation The future….

13

IntegratedEmployer-owned

Framework

• All partnersworking togethertowards sameobjectives

• Seamless userexperience

• Data sets thatcomplementeach other

MERCER 14

Improving Satisfaction and Clinical OutcomesSupporting Employees and Directing Patients

• Combining intensive care management and high value networks targetedtowards reducing variable claims costs by 5-10%.

• Financial management and negotiation of preferred administration modelcan reduce fixed costs by 5-10%.

ManagementSavings Control

Gatekeeper and Clinical Helpline Service

Governance managed through Insurer medical teams

Intensivecare

management

High valuenetworks

Coordinatedchronic care

Plan designflexibility

Financialcontrol

Preferredadministrationand service

partners

MERCER

DOUBLE-DIGIT PREMIUM INCREASESFINANCING THE PLAN

MERCER

Assignmentfailure

16

FinancingA Delicate Balancing Act….

Claimscosts Risk

insurancecharges

Medicalinflation Carrier

costs

Servicedelivery

Governmentreforms

and taxes

TalentManagement

MERCER

FinancingMedical Inflation Pressure

Country

2013GeneralInflation

2013 MedicalInflation

Expected Changein MedicalPremiums

Australia 1.0% 6-7% 5.5-6.5%

China 3.1% 5-7% 10-12%

Colombia 2.3% 4.3% 4.5%-6%

France 1%-2% 1%-2% 3%-6%

Germany 1.6% 1.5% 1.7%

Hong Kong 4.0% 4-5% 10%

India 9.3% 18% 16-22%

Indonesia 4.5% 12-13% 10-12%

Malaysia 2.4% 10-15% 10%

Mexico 3.4% 4% 5%-7%

Pakistan 8.5-9.5% 12-14% 15-17%

Philippines 3.9% 8-10% 10-15%

Singapore 4.9% 3-4% 4-8%

South Korea 3.0% 2% 7%

Taiwan 1.3% 2-3% 4-6%

Thailand 1.9% 18-22% 15-20%

Vietnam 5.6% 20-25% 15-20%

UK 2.7% 8%-10% 8%-10%

• Medical inflation is far higherthan general inflation….andthe gap is widening!!

• Insurers have consistentlyincreased their ‘book’ ratedportfolio rates between 9.5%and 12% for the last threeyears.

1 Projected IMF estimates, World Economic OutlookDatabase, Oct 20122 extracted from Mercer’s Inflation Summary subject tochanges due to updates

17

MERCER 18

FinancingBenefit Cost Containment Measures

• Always a difficult proposition…

• Constrained by the compliance requirements in many markets.

• Innovative strategies – US ‘twin pillar’ plan design.

MERCER 19

FinancingCase Study – Global Consolidation Project

• Global organization, offering three differentmedical plans through two global carriers.

• Two different licenses through one of thecarriers.

• Rising premium charges.• Diverse regulatory frameworks, fragmented service

solutions and varied benefit plans.• No centralized access to information on benefits (design

or financial).

• Conducted claims risk analysis across all threeplans, forecasting future costs by plan andcarrier.

• Modelled claims behaviour patterns throughpotential introduction of twin pillar plan design forUS out-bounds.

• Centralised through one global broker and carrier• Two benefit plan and one consistent premium model.• Projected claims savings for US out-bounds section• Claims savings through localized medical networks.

Situation – Fragmented solutions and short-term strategy

Challenges – Increasing costs and rise in regulation

Action – Internal objectives, leading anddirecting the evolution in carrier solutions

Result – Reduction in long-term claims trend, internaladministration saving, consistent decision making andimproved carrier service

MERCER 20

FinancingCarrier Premium Requirement – Actuarial Forecasting

XYZMedical Expenses Projection and 90% Confidence Interval for 2009/10

£389

£517

£448

£200

£250

£300

£350

£400

£450

£500

£550

Jul 03 Dec 03 Jul 04 Dec 04 Jul 05 Jan 06 Jul 06 Jan 07 Jul 07 Jan 08 Jul 08 Jan 09 Jul 09 Jan 10

Pure

Ris

kCos

t(PR

C)p

erLi

fepe

rYea

r

Monthly PRC 12-Month MA PRC 5% Lower CI 95% Upper CI Expected Fund Long Term Trend

Currently 9,543 risk lives => Expected Fund for2009/10 of £4,276,000

Long Term Inflationary Trend is 8.3%

• Benchmark carrier claims fund requirement against expected claims costs.• Identify the preferred claims funding mechanism, re-insurance and risk charges

in order to support longer term financial strategy.• Benchmark the carrier administration requirement/capabilities.

MERCER 21

FinancingCase Study – Captive Implementation Project

• Review alternative claims funding model, witha focus towards self insurance and the inhouse (captive) insurance company.

• Captive model to be reviewed for appropriateness.• Due diligence process for captive/insurer.• Multiple stakeholders.

• Able to review the last three years claimstrend.

• Mercer projected a hold to the claims fundcompared to a 25% increase through theinsurer.

• 20% reduction in the headline administration charge• Reduction of 12.5% in the proposed fully insured claims

funding requirement.

Situation – Significant first year renewalincrease with new carrier, potential to move tocaptive

Challenges – Incumbent insurer based renewal onlimited nine months data, high MI factor, andadmin rates were ‘above market’

Action – Actuarial claims fund/adminbenchmarking, report on captiveimplementation

Result – Reduction admin margin, reduction in claimsfund requirement, placed through captive in six weeks

MERCER

FinancingRisk Management Approach to Reducing Claims Trend

• Develop robust approach to expatriaterisk management.

• Medical, Security Assistance providerproducts.

• Whilst there is no ROI data available,Mercer has a number of client casestudies demonstrating the financialbenefits of introducing more robust riskmanagement approach.

22

MERCER 23

FinancingCase Study – Risk Management Approach

• 800+ expatriates concentrated in WestAfrican mining site.

• Limited ‘buy in’ from board level at start of process.• Focused on up front rather than longer term claims

costs.• Un-insured evacuation back to the UK took place on

second day of medical contract renewal.

• Mercer worked with the client’s occupationalhealth team globally and in the field toimplement the risk management strategy.

• Identified the need for local medical campaignscentred on chronic diseases.

• Reduction in the incidence of evacuation/repatriationcases.

• A reduction of 40% in premium rates.• Inclusion of a profit share arrangement

Situation – Occupational health strategy ininfancy

Challenges – Increasing costs, employee medical

Action – Develop and implement anoccupational health strategy

Result – Reduction in long-term claims trend,improved employee health outcomes

MERCER

FinancingAsking the Right Questions - Varies by Carrier and Size of Population

Criteria Communityrated

(2 – 50 lives)

Communityrated (50 –150 lives)

Claims rated(150+ lives)

Breakdown of premium

Administration charged on a per life basis

Customize benefit design

Access full claims management reports?

Use of our specific medical inflation rate andtrend factors?

Outline of underwriting methodology

Illustrate impact of care management

Subrogation of claims with local state insurers?

Are evacuation claims included in the claimsexperience?

24

MERCER

OPPORTUNITIES FOR THE FUTURE

MERCER

Transforming Expatriate Medical PlansAreas to focus on in the future

Controlling CostsImprove access toclaims managementinformation, financial

models, andincreasing carrier

competition

Benefit DesignContractual framework

and benefit designto support regional

practise

Improving SatisfactionGlobal service models

with localrequirements and

managed careprinciples

ComplianceComply with home

and host countryframeworks while,

managing people risk

26

MERCER 27

Questions

Joe BarberNew York

Mark HarrisLondon

QUESTIONSPlease type your questions in the Q&A section of the toolbarand we will do our best to answer as many questions as wehave time for.

To submit a question while in full screen mode, use the Q&Abutton, on the floating panel, on the top of your screen.

CLICK HERE TO ASK A QUESTIONTO “ALL PANELISTS”

FEEDBACKPlease take the time to fill out thefeedback form at the end of this webcastso we can continue to improve. Thefeedback form will pop-up in a newwindow when the session ends.

www.mercer.com/webcastsView past recordings and sign up forupcoming webcasts