Defined Contribution Strategies Using Private Exchanges

A Case Study

Barbara M. WattersVice President, Human Resources

February 21, 2013

A multi-generational family business founded in 1945. Grown organically and through acquisitions from 1 location in

Minneapolis, MN to 104 in 21 States. Ford and GM’s largest wholesale distributor of aftermarket

Original Equipment (OEM) parts Serving the Mid-west, Mountain, West including Alaska and

Southwest regions along with select products in other markets and overseas.

“A Forever Company”

Factory Motor Parts Company

Over 2,000,000 sq ft of Warehouse700 + Delivery Vehicles

400 + Sales Professionals

- 35 Location in 2001- 104 Locations in 2012

A Growth Implication for Human Resources: Need Competitive Rewards Strategy

Recruit, Attract and Retain

Our Challenges:• Industry with thin margins• Wage & Benefit Cost Control Critical•Competition = Large Public Employers • Competitive Variations in hire markets• Attractiveness ? -Had 1 HD plan design

BUTKeep Costs and ROI

Additional Challenges

• Leadership Team –The Message: Provides cost predictability with EE satisfaction & market competitiveness.

• Communications – 2000 employees/21 States

• Employee Diversity- Age, Ethnicity, language, geography, education, experience, incomes.

• Limited Computer Access – or familiarity

• Lack of Education/Experience- Little knowledge of plan designs; no experience with choices. Outside support CRITICAL.

• Cumbersome Enrollment Process- (paper & automated)

• Structuring ER Contribution- To be competitive but not cause large migration.

Solution ? A Defined Contribution Strategy in 2012

Predictable Spend for Company …. full suite of Competitive Plan Options and costs for my employees !

Chose from 10 Plans on exchange with an array of plan designs. Chose 3 employer contribution levels – EE/EE+1/Family with

careful consideration to minimizing employee migration to Plan. Self-insured to fully insured for inaugural year; more built-in

benefits Minimal disruption of existing providers with change in

networks; overall increase in provider network nationally. Opportunity to reduce employer spend by 8-12%

• No organic increase in enrollment or level of choice• Employer spend reduced• Employee visibility to spend – seen as “additional pay”.• EE’s very positive to having choices that fit them!• EE’s saw better options for them at less cost than HD Plan.• Attractive to recruits; + retention effect.• Enrollment: 68% Web Tool 32% Call Center• EE increased satisfaction with Medica provider networks & service in many geographic areas.

2012 Defined Contribution Strategy- The Results

Year 2: 2013 Defined Contribution Strategy

• Made Voluntary Increase in employer contribution/spend of 8.5%.

• Plan designs remained constant – EE’s very happy with the choices.

• Added Medica’s Choice Passport ACO network of providers as option for 11-county Twin Cities’ Metro area.

• Changed HRIS and implemented its’ benefit on-line enrollment functionality. Medica Customer Call Center for plan enrollment support was big plus.

Defined Contribution Strategy with My Plan by MedicaConclusion

Predictable Spend

Cost Savings

Administrative Support

Employee Satisfaction

• Flat $ fixed cost for health spend per EE

• Ability to offer competitive choices to EE’s and recruits with no administrative hassles.

• 10% cost decrease in 2012 vs. 2011 with increase in benefits.

• Positioned for spend control going forward.

• Dedicated Call Center & web decision tools that provide EE’s an unbiased, user friendly experience - thus minimizing my HR staff time.

• Popular Health Plan Options for all EE types, regardless of location. ACO definite +

• Medica/UHC network - a value -add nationally

• EE’s can choose by purse and individual needs

• EE’s appreciated the transparency , support & the empowerment of choice.