1. HR’S ROLE IN
HEALTH CARE
REFORM
Reevaluating Your Total Rewards Strategy
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2. Session Objectives
 Business Impact of Pay or Play Decisions for HR
 Implications to Total Rewards Strategy
 Role of Benefits in Employee Engagement
 Key Considerations for Achieving an Optimal Total Rewards Strategy
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3. T he Af for dable Car e
Act
The Affordable Care Act (ACA) offers employers the
choice to “pay or play”
 Employers can offer health insurance to their workforce or pay a
non-deductible tax penalty to the IRS
 Health care exchanges provide an open market where customers
can pick the right plan at the right price for their needs
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4. Wer e You Ready for
HCR THEN?
In 2010, most employers predicted reform would have no impact
on workforce management objectives.
Improving productivity 72%
Engaging employees in driving business results 74%
Attracting and retaining talent 67%
Providing effect total rewards package 49%
Health care reform is forcing employers rethink their employee
value proposition and educate workers about how their
health-related behaviors affect the bottom line.
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5. Are You Ready for
HCR NOW?
Fewer than half of human
resources and employee benefits
decision makers are confident
that they understand employer
responsibilities under the ACA
More than 50% of small and midsized companies are not prepared
to provide the SBC, and a third of large companies are also not
prepared for this requirement
Roughly a fifth to a third do
not or are not sure if they
expect some degree of impact
resulting from the
establishment of public
Source: ADP Research Institute Survey May 2012
Exchanges on January 1, 2014 5

6. Health Car e Refor m
Drives Business
Outcomes
How will employers respond?
Most Employers Expect to “Play” by Retaining a Medical Program
after 2014
15%
"Pay" options
13%
67%
"Play" options
67%
Finance
18%
Don't know HR
20%
Source: 2011 Towers Watson-Forbes Survey: Opportunity to Align Cost and Talent Objectives
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7. T he Impact of Health
Exchanges
What is the difference between private and public
health exchanges?
 Private exchange is funded using a defined contribution approach
 Under this plan, the employer funds a defined account on a pre-
tax basis for each eligible employee who then purchases health
coverage within the exchange 33000516
 Private corporate exchanges are considered employer-sponsored
health coverage
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8. Defined Benefit vs.
Defined Contribution
Defined Benefit Defined Contribution
 Employer contributes  Employer contributes
finite amount towards finite amount towards
employee’s health employee’s health
insurance insurance
 Variable employer cost  Employer controls
of health care annual cost increases
 Uncertain annual health  Increased product
care cost increases options selected by
 Limited product options employee
selected by employer  Recommendation
 Limited decision engine to identify best
support for choosing option for employee
health plan
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9. Poll
What impact will Reform have on my company’s ability to achieve
workforce management goals (productivity, attraction and retention,
competitive rewards package)?
1. Positive Impact
2. No impact
3. Negative Impact
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9

10. Health Car e Refor m
Drives Business
Outcomes
“Pay or Play” decision impacts:
 Different workforce composition- more part-time workers
 Reallocation of total rewards package- additional compensation in lieu
of health insurance
 More health care choices for employees- workforce uncertainty
 Corporate image and perception
 Internal and external administrative challenges (data gathering, tracking
and reporting)
 Competition for critical talent
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11. Implications to Total
Rewar ds Str ate g y
Health Care Reform will have a direct impact on:
 Attraction and retention
 Total Rewards mix
 Employee engagement
 Competitive position in the marketplace
Employers must take into consideration:
 Organizational Philosophy/ Mission/Values
 Competition for talent
 Employer Value Proposition
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12. Implications to Total
Rewar ds Str ate g y
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13. Total Rewar ds
Str ate g y- Key
Consider ations
 Does your Total Rewards program attract, retain and engage the
talent you need?
 Does your Total Rewards program align employee behavior with
the organization’s overall strategic objectives?
 What are the tradeoffs for balancing employer and employee
objectives?
 Do employee understand the value of their Total Compensation
package?
13

14. Poll
Are you having difficulties with attracting and retaining top
talent and those with critical skills in your organization?
1. Yes
2. No
10
14

15. Attr action and
Retention Issues
Evolve Around
Critical Skills
% of Companies Citing
2007 2008 2009 2010 2011
RETENTION Difficulties
Critical-skill employees 49% 47% 16% 31% 36%
Top-performing employees 40% 37% 14% 25% 28%
All employees 27% 19% 5% 11% 11%
Quit rate 2.1% 1.9% 1.2% 1.3% 1.3%
Number of quits per month (in
millions) 3.1 2.7 1.7 1.8 1.9
Sources: 2011/2012 Talent Management and Rewards Study, Towers Watson
and the U.S. Bureau of Labor Services
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16. Employee Value
Pr oposition (EVP)
Total Rewards is a key component of a company’s EVP.
Business Strategy Business Results
Organizational Context Employee Performance
Human Capital Practice Financial Performance
Brand Promise Customer Engagement
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17. W hat is your
Employee Value
Pr oposition?
Benefits  Medical  Prescription Drug Plan  Legally Required /
 Dental  Life Insurance Mandated
(Unemployment, Social
 Vision  EAP Security, Workers’
 FSA  Retirement (DB and Compensation, Medicare
DC) and State Disability)
Comp  Fixed Pay (aka base  Variable Pay (at risk)
pay)
Performance  Performance and Goal  Self, Peer and 360  Formal or informal
and Setting degree feedback  Cash or noncash
Recognition  Ongoing coaching and  Rewards and rewards
feedback Recognition
Development  Tuition reimbursement  Corporate universities  Internships
and Career and / or discounts  Coaching / Mentoring  Apprenticeships
Opportunities  Attendance at outside  On-the-job learning  Job rotations
seminars
Work-Life  Health and Wellness  Workplace Flexibility  Community Involvement
 Caring for Dependents  Paid & Unpaid Time Off  Culture Change
Initiatives
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18. W hy is it Impor tant?
Optimal Mix Employ Drive
The Company’s
of Reward Top Talent Business
Ability To
Elements That Is Success
 Attract 1. Compensation  Engaged  Performance
 Motivate 2. Benefits  Satisfied  Results
 Retain 3. Work-Life
4. Performance &
Recognition
5. Development
& Career
Opportunities
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19. Attr acting and Retaining
Critical Wor kfor ce
Se gments
Ho
What are the current
demand / supply
characteristics of your
labor market?
Is a particular skill set
or expertise in especially
high demand?
Which positions are
most critical to the
company’s success?
Which positions are
the hardest to find and
keep?
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20. T he Reality is…
Organizations Must Consider:
 Understanding the different segments of their workforce and
implementing tailored strategies to attract, develop and retain
them
 Falling too far behind increases the risk of losing key talent when
the economy turns around
 68% of employees said their benefits influence whether they
choose to stay in their current job (Source: MetLife; 7th Annual Study of
Employee Benefits Trends)
 Job candidates evaluate not only salary but total rewards
packages
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21. Poll
Do you think that your top competitors will maintain
employer sponsored health insurance benefits?
1.Yes
2. No
10
21

22. Employee
Enga gement
Definition of a Fully Engaged Employee
 Is enthusiastic and inspired by his/her work
 Is willing to “go the extra mile”
 Believes they can affect quality, customer service, and business
costs
 Believes in the organization and works to make it better
 Understands organizational context and the “bigger picture”
 Respects colleagues and helps others
 Remains at the organization despite opportunities elsewhere
22

23. W hy Employee
Enga gement Matter s
It is estimated that disengagement costs
companies $350 Billion per year in lost
productivity.1
 Higher productivity
 Lower turnover
 Attract top talent
 Enhanced reputation
 Improved customer satisfaction and
loyalty
 Reduced absenteeism
 Sustainable growth
 Resilient in the face of change
Source: 1
Gallup August 2009 Employee Engagement Index
23

24. T he Impor tance of Health Car e
Benefits
Employers underestimate the importance of health care benefits to
attracting employees
All Employees High-Potential Employees
Rank Employers Employees Rank Employers Employees
1 Base Pay Job Security 1 Challenging work Job Security
2 Organization’s Base Pay 2 Career development Base pay
mission and opportunities
values
3 Organization’s Health care benefits 3 Organization’s Career development
reputation as a mission, vision and opportunities
great place to values
work
4 Career Length of commute 4 Base pay Promotion opportunity
development
opportunities
5 Challenging work Vacation/PTO 5 Organization’s Health care benefits
financial performance
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Source: Towers Watson 2011 Talent Management and Rewards Survey

25. T he Role of Benefits
in Employee
Enga gement
Organizations Must Consider:
 An effective benefits strategy tailored to the needs of the
workforce creates a positive brand image
 Sends a message
• We care about our employees
• You are joining a healthy and engaged team
 A recent MetLife study noted that 68% of employees said their
benefits influence whether or not they choose to stay in their
current job
 Gather and analyze information (benchmarking, demographics,
surveys)
 Inventory current benefits offerings. Do they align with overall
benefits strategy?
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26. W hat Do Employees
Want?
 The current system of job-based
Value in
benefit coverage restricts choice Employer
and that employees greatly Benefits
value being able to exercise that
choice
 Employees value choice in Provide
Change
more
health plan offerings Options for
Would be
Slow
 Employees most often selected Employees
plans within the same price
range as their current employer-
offered plans
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26

27. W hat Do Employer s
Want? benefits to employees as part of the employee’s total
 Continue to offer
compensation package
Source: 2012 Survey on Employer Health Benefit Plans and Preferences by Oliver Wyman
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27

28. W hat Can Employer s
Do?
Continue to Reduce Benefits / Cost Shift to Employees
Offer Value Based Benefits or Wellness Incentives
Offer Narrow Networks / Implement Compliance Models
Get Out – Move Employees to Public Exchange
Defined Contribution with Private Exchange
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28

29. Employer
Considerations
Before dropping health coverage, employers should
consider:
 Tax implications – employer and employee premiums are pre-tax
shielded from FICA and income taxes
 Coverage in the exchange may be inferior to employer sponsored
health plans 33000516
 Moving to the exchange is an all or nothing proposition
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30. Implications to Total
Rewar ds Str ate g y
Health Care Reform will have a direct impact on:
 Attraction and retention
 Total Rewards mix
 Employee engagement
 Competitive position in the marketplace
Employers must take into consideration:
 Organizational Philosophy/ Mission/Values
 Competition for talent
 Employer Value Proposition
30

31. Total Rewar ds
Str ate g y- Key
Consider ations and engage the
Does your Total Rewards program attract, retain
talent you need?
 Does your Total Rewards program align employee behavior with
the organization’s overall strategic objectives?
 What are the tradeoffs for balancing employer and employee
objectives?
 Do employee understand the value of their Total Compensation
package?
31

32. Take a Str ate gic View
Health care strategy, as an element of the Employee Value
Proposition, is formed through internal discovery, internal
philosophy and competitive pressures.
How does this decision affect employees? Your competitive
positioning?
Would these dollars be reinvested elsewhere in Total Reward
Portfolio
Would you lose control over the company's investment of
workforce health?
Can you still influence employee well-being and productivity?
Group benefits plan vs. private exchange?
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33. Do Your Homewor k
As with any major change initiative, people need to be involved to
build acceptance and adjust behaviors.
 Gather and analyze information (benchmarking, demographics,
surveys)
 Consider internal and external factors that may influence your
health care strategy
 Inventory current benefits offerings. Do they align with overall
benefits strategy?
 Understand your health plan offerings and costs
 Know the provisions of the new health-care reform law
33

34. Poll
If Reform increases your organization’s health care costs
would you:
1. Pass cost increase to
employee- increase
share of health costs
paid by employee
2. Reduce health benefits
3. Absorb cost in the
business
10
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35. Health Car e Refor m is
a Catal yst for Change
Employers now have a significant opportunity to reshape their
Employee Value Proposition and Total Rewards strategy to:
 Ensure competitiveness while managing costs
 Align employer and employee goals
 Update Total Rewards programs to maximize employee
engagement
 Enhance corporate image through effective communication and
change management programs
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36. Education is Key
 Educate management on reform and their implications
 Model financial impact of reform on the organization
 Educate employees on reform and their implication
 Reexamine your benefits strategy regularly
36

37. Change Mana gement
As with any major change initiative, people need to be involved to
build acceptance and adjust behaviors:
 Significant effort is necessary to educate and engage employees
 Enlist support from leaders
 Solicit employee input
 Communicate relevant and timely information on an ongoing basis
to employees
 Engage employees in a meaningful conversation about health care
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38. Pr epar e Mana gement
for Change
Use health care strategy to inform management how Health Care
Reform continues to affect the company.
 Changing health care landscape affects business overall
 What competitors are likely to do
 How the organization aligns its health care strategy with its total
rewards strategy
 The potential impact of health care related decisions on employee
relations and productivity
38

39. Pr epar e Employees
for Change
In 2010, most employers predicted reform would have no impact
on workforce management objectives.
Communicate relevant and timely information on an ongoing basis
to employees
Focus on the total health experience as part of the employee value
proposition
Engage employees in a meaningful conversation about health care
39

40. Achieving the Optimal
Total Rewar ds
Str ate g y
Organizations Must:
 Understand the critical workforce segments and implement
strategies to attract develop and retain them
 Create a mix of rewards to balance company and employee needs
 Design total rewards strategy to influence the right behaviors to
drive business results
 Continuously evaluate the rewards mix – to avoid losing key talent
when the economy turns around
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41. Key Takeaways
 Align Employee Value Proposition and Total Rewards Strategy
 Engage leaders and employees regularly and act on feedback
 Measure results in context of business outcomes
 Recognize that improved workforce health increases employee
engagement, which in turn improves business results
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42. Questions?
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