A&S Financial Services, Inc.

Managed Care Consulting Services

Integrated Benefits Philosophy

Introduction

Step 1: Institute Our Effective Managed Care Program

Step 2: Fund Plan With A Flexible Alternative Funding Arrangement

Step 3: Strategically Redesign Health Care Benefits

Step 4: Redirect Some Plan savings Into A 401(k) Plan

Step 5: Communicate The Entire Benefit Plan Effectively

Putting it all Together

INTRODUCTION

Creating A Benefits Package That Performs In The '90s

America's Medical costs are $1 trillion. We all know that these costs impact every company's bottom line. At the same time, we're at the end of the baby boom generation, and during the '90s, employers will be faced with a shrinking labor pool. Labor shortages expected for the year 2000 are starting much sooner than predicted, and a lot of companies are already feeling the crunch. In this environment, companies need a strong benefits package to help them attract and retain top-notch employees without increasing company costs.

These two goals - controlling costs and providing competitive employee benefits - don't have to be at odds. With a strategic approach for your entire employee benefits program, we can help you offer your employees a better overall benefits package without spending more money.

To meet the challenges of the '90s, A&S has a simple solution: efficiency. We've combined employee benefits into one cost-effective package so benefit dollars can do more. Costs are tackled aggressively on all fronts, and health care benefits are redesigned so that benefit dollars can be put to better use. Your company gains from:

Effective managed care
Flexible funding arrangements
Efficient design of health care benefits
Tax-sheltered benefits
Effective plan communication

By looking at the big picture and working with you to design a contemporary employee benefits package, we help you make the most effective use of limited benefit dollars. Rather than spending more, we help you spend more efficiently. That translates into a win/win situation for your company and your employees:

Your benefit dollars are put to work where they'll help you most ... providing competitive benefits to help you attract and retain top-notch employees.

Your employees get a benefits package that helps them cut out-of-pocket expenses and take advantage of tax-deferred savings.

Getting the most for every benefit dollar is what we mean by performance. With A&S, you can meet the challenges of the '90s with a finely tuned benefits package that's right for you.

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Step 1: Institute Our Effective Managed Care Program

Managed care with rigorous cost and quality controls must be the foundation of any strategic employee benefits plan. A pioneer in the managed care arena, A&S has built a technically advanced managed care system that produces significant savings without compromising quality of care. It is composed of three key components:

National Managed Care Network - ALL physicians and hospitals included in our managed care network have been rigorously screened for quality and cost-effectiveness. In addition, our network physicians agree to a competitive fee schedule, and network hospitals are contracted under competitive per diem or discount arrangements. The result is a network of top-notch, cost-effective providers that saves money for you and your employees.

Utilization Management Service (UMS) - Our patient-sensitive utilization management program is among the most comprehensive and sophisticated in the business. In addition to telephone based utilization review, UMS includes targeted concurrent review, discharge planning and catastrophic case management. The program protects patients from undergoing unnecessary procedures and saves money for you and your employees.

Provider Quality Of Care Monitoring - Providers in our network are monitored on an ongoing basis for quality of care, patient service and efficiency. We analyze data from a variety of sources to ensure that hospitals and physicians continue to meet high standards of quality and cost-efficiency. In addition to ensuring high quality care, this process results in significant savings for you and your employees.

Since health care costs are the single most expensive benefit provided by employers, this solid managed care program provides a strong foundation for long-term savings and quality care.

Although effective managed care is the first step to controlling costs, it's important to design your plan to benefit the majority of your employees. We help you evaluate existing health care benefits and redesign them with the company's entire employee benefits program in mind. Funds for benefits that the majority of your employees don't use are redirected into highly visible benefits all employees can use. The result is more value for your benefit dollars and increased employee appreciation.

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Step 2: Fund Plan With A Flexible Alternative Funding Arrangement

Creating sound funding arrangements that best meet your needs is another integral part of a strategic benefits plan. With an advanced alternative funding arrangement, your company will benefit immediately from:

Managed care savings
Improved cash flow
Better control over benefit costs

With an alternative funding arrangement finely tuned to your needs, your company benefits directly from managed care savings and good claims experience. Your payments are made after the cost is actually incurred, rather than as a part of a level monthly premium. With our flexible banking arrangements, you can also choose when to pay your bill by selecting the cash flow option that best meets your financial management needs.

With our alternative funding arrangements, your company also eliminates the costs of establishing an insurance carrier's margin, as well as the premium tax on claim payments and administrative services. Reserve funds are retained by your company to invest as it chooses.

On top of these savings, you have independent control over your plan design if you select an administrative services only (ASO) arrangement. Since state-mandated benefits are not required with ASO plans, you choose whether or not to offer these expensive benefits.

We back our alternative funding arrangements with comprehensive specific, aggregate and terminal stop-loss provisions. This ensures that you're protected from unfavorable claims experience. The bottom line is that you can safely realize tremendous cost and cash flow savings by reconfiguring the way your company finances benefits.

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Step 3: Strategically Redesign Health Care Benefits

Although a strong managed care program and advantageous plan funding are two key steps to controlling costs, a strategic redesign of health care benefits lets you meet the diverse health care needs of the majority of your employees and reduce your costs as well. Depending on your plan design, this can be accomplished in several ways:

Make the differential between network and non-network providers significant so that employees will have a strong incentive to use cost- effective network providers.

Revise plan deductibles, out-of-pocket expenses and physician copayments to enhance benefits for routine services that the majority of employees will use while controlling costs of major expenses incurred by a small percentage of employees.

Offer a Flexible Benefits Account to offset increases in employee out-of-pocket expenses and to lower taxes for you and your employees.

A Flexible Benefits Account (FBA) is vital because it allows you to modify health care benefits while providing employees with a tax effective way to pay for expenses not covered under the plan. Employee pre-tax dollars can be set aside to pay health insurance premiums and anticipated medical, dental, vision or dependent care expenses. In fact, because each employee wants something different - like coverage for contact lenses, orthodontic expenses, or help with child care expenses an FBA lets employees pay with pre-tax dollars for benefits they'll actually use instead of paying premiums for benefits they don't need.

Employees benefit because it raises their net income. At a time when companies are asking employees to share the costs of health care, an FBA also helps defray these out-of-pocket expenses.

The company benefits from savings on what are traditionally considered "fixed" costs - the taxes paid on employee wages. In addition, the company can use the FBA to increase employee contributions without changing the employee's net income.

A carefully designed health care program that includes an FBA allows your company to enhance its benefits package while lowering overall costs.

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Step 4: Redirect Some Plan savings Into A 401(k) Plan

The most significant enhancement you can make to your company plan is to add a 401(k), the fastest growing, most popular employee benefit of the decade. Necessary changes in health benefits or employee contributions may be offset by the addition of a 401(k) plan. With a 401(k), employees can make regular payroll contributions into a tax-deferred investment vehicle. This gives them immediate tax advantages while they accumulate savings for the future. And our 401(k) plan includes flexible investment options that allow each employee to design a personal investment portfolio.

A 401(k) gives your company important tax savings opportunities as well. Company expenses and contributions to the plan are tax deductible. Coupled with a Flexible Benefits Account, a 401(k) can significantly reduce the tax burden for the company and its employees. It's a win/win situation.

A&S' 401(k) is a low-cost, high-return benefit because:

With our strategic benefits plan, the money trimmed from your overall benefit cost is redirected into this highly visible benefit that all employees can use.
Using these redirected funds, you match some percentage of your employees' contributions from the fixed savings. To further enlist the cooperation of all employees in reducing medical plan expenditures, you also might want to consider making a "bonus incentive" contribution to the 401(k) plan if your company has favorable claims experience.
Unlike inflationary health care costs, funds used for a company 401(k) are virtually inflation-proof. This means the 401(k) will work for you and your employees now and in the future.

We can help you structure an effective approach by using plan design changes to achieve fixed savings and using a "bonus incentive" program to achieve variable savings. Both of these lower your health care bill and maximize the effectiveness of your total employee benefits program. The net result is that your benefits package becomes more cost-effective and competitive, so your company is better able to attract and retain high quality employees while controlling costs.

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Step 5: Communicate The Entire Benefit Plan Effectively

Benefits communication used to be considered an option rather than a necessity, but today's employers can't afford that kind of thinking. Benefits communication is a vital component of the overall benefit strategy to lower costs and heighten employee appreciation because:

Managed care is more complex than the old "blank check" indemnity approach, so employees need to learn how to use their plan effectively. They need to know that they'll pay more of the bill if they don't.
Employees need to understand Flexible Benefits Accounts and 401(k) plans to use them effectively and appreciate their value.
Independent industry surveys indicate that good communication is the key to greater employee appreciation. Employees who understand their benefits rate their benefits package higher.

Benefits communication is most effective when all components of the plan are communicated together, so A&S works with you to communicate the entire plan. Changes in the design of the medical plan and any increases in cost sharing need to be offset by the FBA and 401(k) benefits. Our communication experts use a personal approach to maximize employee appreciation, understanding and participation:

Group Meetings - Our communication experts conduct group meetings to explain all components of your benefits package to your employees.
Individual 401(k) Counseling - Our communication experts also provide individual counseling to help employees understand investment options and determine an optimum contribution level. Our communication experts use laptop computers to show how pre-tax contributions will affect an employee's overall pay and to illustrate the advantages of pre-tax savings and matching employer contributions. Employees are also shown how rapidly pre-tax savings can accumulate.

In addition, we offer a full range of standard and customized communication services, from preparing booklets, ID cards, claim forms, and explanations of benefits to providing consumer-oriented audio-visuals, brochures, posters and payroll stuffers. With effective communication of all benefits, you'll save money and heighten employee appreciation.

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Putting it all Together

By implementing this five-step benefit strategy, you and your employees will benefit:

You'll control medical costs, increase the efficiency of your benefits program and place benefit dollars where they'll work to your advantage.
With high quality managed care, FBA and 401(k) programs, your employees also get better overall benefits - benefits they can tailor to meet their unique needs.
Since your benefits package includes tax-advantaged benefits, both you and your employees get more for your benefit dollars.

That translates into a winning benefits package for your employees and your company.

By working with you to implement an integrated benefits plan, we help you tackle rising costs and enhance benefits. As the labor pool shrinks, this puts you in a stronger position to attract and retain the high quality employees so vital to every successful company.

With A&S, your business has an innovative partner to help you meet the challenges of the '90s.

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