Post on 11-Jul-2020
transcript
Presented by
Ryan Jackson
Sara Hames, CEBS
Executive Review:
Self-Funded vs. Fully Insured
Health Plans in the PPACA era
Dave Hazen, CFO - Racine Unified School District
Julie Kelly, Director of Business Services – Muskego-Norway School District (formerly with St. Francis School District)
Sara Hames, CEBS – Consultant, Hays Companies
Ryan Jackson – Director, Hays Companies
Introduction
Fully Insured versus Self Funded
Self-Funded Basics ◦ Stop Loss
◦ Claims Reports
◦ Cash Flow
◦ Reserves, Surpluses, Deficits
◦ Data
Sample Analysis/Projection
PPACA’s influence
55% of all employees covered through their employer are in self funded plans
Overall trend by small and midsize employers - under 200 EE's - to self fund (UBA Advisors) ◦ UBA Employer Opinion Survey (2-200 EE's) 17.5%
currently self fund 12% are likely to implement ◦ Current self funded by industry
Government/Education/Utilities: 20.7% Wholesale/Retail: 11.6% Manufacturing: 11.3% Finance/Insurance/Real Estate: 9.2% Health Care/Social Assistance: 8.7%
◦ Kaiser Family Foundation (2-199 EE's) 16% of companies self fund in 2010 - was 12% in 2008.
Fully Insured Plan: An insurance arrangement in which the employer
contracts with a health plan that assumes financial responsibility for the
costs of enrollees’ medical claims and administration.
Self-Funded Plan: An arrangement in which the employer assumes
direct financial responsibility for the costs of enrollees’ medical claims.
Employers sponsoring self-funded plans typically contract with a third-party
administrator or insurer to provide administrative services for the self-
funded plan. In most cases, the employer may buy stop-loss coverage
from an insurer to protect the employer against very large claims.
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Transference of Risk ◦ Stop loss is a form of reinsurance that employers buy to limit their losses
when self-funding their health care plan.
Aggregate: Insures against total claims exceeding an estimated dollar amount plus a margin during a plan year. It can include a monthly accommodation
Specific: Insures against a single high cost claimant that exceeds a dollar limit, i.e. $40,000 for a plan year
Laser: A risk sharing contract feature on individual stop loss contracts. The employer shares in additional risk for an ongoing, high cost claim. For example:
Specific stop loss is $50,000
One ongoing high cost claim within group. Stop loss carrier sets the laser at $250,000
Employer has an additional risk of $200,000 (or total risk of $250,000) for the ongoing, high cost person
Terminal Liability: Provides 3 to 6 months of run-out protection when stop loss policy terminates
Contract Liability: Defines what incurred and paid dates are covered under the policy: 12/12, 15/12, 24/12, 12/15, 12/18, etc.
Fully Insured Self-Funded
Subject to state mandates?
Yes Generally No
IBNR Held by carrier Held by District
Participation in current year experience?
No unless a ‘retro’ or ‘performance reward’ is offered
Yes
Bundled or Unbundled Components
Bundled Only Can be either
Margin and premium taxes?
Yes; it’s built into the premium
Margin is optional Taxes are eliminated
Plan Design Flexibility Limited by Carrier Flexible and customizable
Budget? Set by Carrier Set by District but can vary from month to month
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Advantages
Level premium regardless of “poor” claims experience for that year
Easy to switch carriers as reserves are included in the premium paid
Easy to budget on an annual basis
Administration usually more simplified (depending on number of locations)
Disadvantages
Level premium regardless of “good” claims experience for that year
Subject to state mandates which may make plan more expensive
Multi-state employers have different plan designs by state
Bundled and thus unable to interchange “broken” parts (administration, network, etc.)
Must pay premium, taxes, and margin on top of administrative and claim expenses
Less plan design flexibility Limited data available
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Advantages Disadvantages
Generally lower cost of operation
Able to unbundle and seek least expensive/best service for each component
Uniform plan designs nationally
Better cash flow as hold own reserves
No margin or premium taxes
Able to take advantage of “good” experience within plan year
More plan design flexibility
Employer can choose how much risk they can tolerate
Claims may exceed expected level in a “poor” experience period and may exceed budget if budgeted at “expected” level.
Costs may vary widely from month to month
Employer may ultimately be the “final say” for claims appeals, putting the plan administrator in a sometimes uncomfortable position
258 Employees, $1500 Deductible, Insured Premium of $12,473 PEPY
2009 Changed to Self-Funded, $750 Deductible ◦ 1st year cost = $7,736
◦ 2nd year cost = $8,091
◦ 3rd year cost = $9,099
◦ 4th year projected cost = $9,863
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ABC School DistrictSelf Funded Analysis
Specific Level: $50,000
7/2010 - 6/2011 7/2011 - 6/2012
Average enrollment 414 403
Incurred Claims $6,095,314 $6,327,815
Less Excess Claims over $50,000 $925,879 $796,604
Adjusted Incurred Claims $5,169,435 $5,531,211
Estimated Administration Fee $173,880 $178,194
Estimated Stop Loss $50,000* $621,000 $745,201
Estimated Aggregate Stop Loss $24,840 $26,278
Total Self Funded Plan Cost $5,989,155 $6,480,884
Fully Insured Premium paid $6,215,978 $6,837,576
Estimated Savings - Self Funding $226,823 $356,692
Savings % 3.6% 5.2%
* Stop loss premium excludes Medicare retirees.
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Access to more robust utilization data Wellness programs can help to reduce rates/costs
directly and immediately Offer the same uniform health plan in multiple states Not required to offer tailored benefits to each state
dependent upon the existing state mandates Flexibility in coverage denials Self funded plans determine their own plan designs
(must follow certain federal guidelines) Avoid or reduce premium taxes. Administration fees
are approximately 6-15% of total premium: retention is significantly reduced
Many TPAs/stop loss carriers have stared targeting small-midsized employers with products for as few as 25 employees
A robust data tool can answer many critical questions, including: ◦ How much are we paying for
health care?
◦ How much are other companies paying?
◦ Which areas within our plan are most costly?
◦ How efficient is our plan design?
◦ How much does chronic disease cost?
◦ Are members getting their recommended preventive care
It should have the ability to,
◦ Drill-down into specific areas uncovering hidden problems and opportunities
◦ Predict the impact of changes in plan design & value
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Prohibit Discrimination in favor of highly compensated
Requires reporting of medical loss ratio (MLR) and provision of rebates
Annual Rate Review Impose community rating rules Requires coverage for Essential Benefits
Self-Insured Plans Are Not Subject to the Jurisdiction of State Ombudsmen48 – PPACA provides for the creation of a state-level office for an “Ombudsman.”
Fully insured plans below 50* lives must community rate oNo health underwriting adjustments oDisadvantage to healthy groups
Rates may only vary based on the following: oAge – no more than 3 to 1 ratio oTobacco use - no more than 1.5 to 1 ratio o Self or family coverage oRegion
Deductibles may not exceed $2000 Single/$4000 Family
*State may re-define this
Avoid one of the largest Taxes/Assessments:
◦ Health Insurance Tax (HIT):
Approx. 1-2.3% of Premium $30,000 to $69,000 on $3,000,000 in annual premium
Retain ability to keep high deductibles
Avoid the estimated “loads” of 15% to 50% from insurers for taxes and new product designs
Ensure stop loss and TPA’s are the best fit for the District
Provide Actuarial and Underwriting services
Select best provider network(s): access and discounts
Detailed Claims Reporting ◦ Demographic analysis ◦ Member illness burden analysis ◦ Preventive care compliance ◦ Identify greatest risks ◦ Customized wellness programs ◦ Targeted member communication