Joe Barber, New YorkMark Harris, London
CHARTING YOUR COURSE FOR GLOBAL EXPANSIONMANAGING EXPATRIATE MEDICAL PLANS
APRIL 10, 2014
MERCER WEBCAST
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
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Today’s Objectives
3
Rememberno one size
fits all
Share experiences Understanding currentand future opportunities
Answer your questions
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
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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
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Plan DesignBenefit Options – Employee Perception Versus Premium Saving
Source: Benefits Survey for Expatriates and Globally Mobile Employees
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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…
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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
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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
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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
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Assignmentfailure
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FinancingA Delicate Balancing Act….
Claimscosts Risk
insurancecharges
Medicalinflation Carrier
costs
Servicedelivery
Governmentreforms
and taxes
TalentManagement
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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
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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.
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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.
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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
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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.
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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
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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?
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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
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MERCER 27
Questions
Joe BarberNew York
Mark HarrisLondon
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