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The Basics of Self Funded Health Plans for Small Employers 11084s1212 Edition 12.18.12 Brought to you by: Allied National February 2014
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The Basics of Self Funded Health Plans for
Small Employers
11084s1212Edition 12.18.12
Brought to you by: Allied National February 2014
• Who is Allied?• Why Self Funding Today?• Affordable Care Act Impact• What is Self Funding?• Is Self Funding Right for YOU?• What is ERISA?• What is Funding Advantage?• Underwriting Self Funding• Next Steps
Topics Covered Today
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Allied NationalOverland Park, Ks.
2nd generationfamily-owned business
Founded 1970
Insurance Administrator
Our Allied National Culture
InnovationStabilityService
Why Would a Small Business Want to be Self
Funded?
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Projected Self Funding Costs
Increases Cost
Adverse Impact of Affordable CareAct on Fully Insured Employers
$Community rating
3:1 age slope rating
Pre-ex included
Minimum essential coverage
Coverage mandates
Guarantee Issue
Premium taxes
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What is Self Funding?Fully Insured
• Risk bearer is the insurance company• All RISK transfers to insurance company
Self Funded
• Employer is the risk bearer!• Claims paid from employers claims fund• Employer hires/assigns a claims administrator to
pay claims• Employer purchases Stop Loss Insurance
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Stop Loss Insurance
Specific Stop Loss• Claims paid by carrier when an
individual’s claims exceed a set dollar amount
Aggregate Stop Loss• Claims paid by carrier when the group’s
total claims exceed a set dollar amount
Employer’s risk is minimized
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Why Self FundingLong Term – it’s the most cost effective way to finance a group health plan• Eliminates insurance company profit• Eliminates state insurance premium taxes• Allows employer to take control of group benefit
planMoney not spent on claims belongs to the employer – not the insurance company
Avoids many negative impacts of ACA
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Sample Small Employer Self Funded Program – 55 lives
Self Funded Claim PaymentSample $60,000 Claim
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Employers Specific Stop Loss
Employers Claims Fund
Employers AggregateStop LossEmployers Specific Stop Loss Limit
- $25,000
$2,000Paid by employee
$25,000Paid from employers claim fund
$33,000Paid by Stop Loss Carrier
• Self Funding “on training wheels”• 5 to 250 lives• Self funding made “SIMPLE”• Prepackaged plan docs, integrated specific
and aggregate stop loss policy• Level monthly payment plan• Terminal liability coverage included• Medically Underwritten
What is Funding Advantage?
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Funding Advantage Simplified Self Funding
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• Level monthly payments
• Protection against large claims orunfavorable claims experience
• No hidden fees of ‘pass through’
costs
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• Healthy groups• Desires lower long-term costs• Experiencing adverse premium impact from
ACA• Desires greater control and flexibility• Needs better claims reporting• Promotes health and wellness with
employees• Desires predictable cash flow
Who is the ideal candidate
Self Funded Group Health Plans
are subject to “ERISA” regulation.
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What is ERISA?
Employee Retirement IncomeSecurity Act 1974
ERISA enables self funding
ERISA pre-empts the state’s ability to:• Mandate health insurance contract terms and
benefits
• Impose premium taxes
• Impose underwriting constraints and mandated premiums
• Directly control pre-existing condition limitation
• Limit employee benefit plan options
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Role of Self Funded Plan Administrator
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• Assist with plan design• Underwrite Stop Loss contracts• Assist with plan communications• Provide network access• Claims payment• Claims management• Provider negotiations• Reporting and compliance services
Allied National’sUnique Underwriting Philosophy
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Traditional Underwriting
TODAY
Allied National Underwriting
Price based on past health history, experience, industry trends, and industry loads
Price based on future health care costs
Past history
Future costs
Allied National’sUnique Underwriting Methodology
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Traditional Census & Plan Design
Allied National UnderwritingIndividual Medical Applications
Current Health Condition x
Current Health Care Cost =
Projected Costs
Industry Trend + Group Experience + Underwriting = Renewal Rate
Self Funding Sample Case Study
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85 Employees$6.5M Sales - pretax profit
12%Renewal Premium $612,000
Self Funded Program $610,000
Employer’s Loss Fund $366,000
Projected Refund 20% ($73,200)
Net Cost $536,800Refund = 9.3% of profit
Next Steps
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1. Agent contacts Allied
2. Current census
3. Plan design & benefits
4. Current and renewal billing
Process
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1. Initial Proposal (Indication)
2. Completed Applications
3. Final Proposal
4. Accept Terms
5. Install Self Funding
Thank you!For more information:
Allied Sales Support888-767-7133
[email protected]/alliednational
Fax: 913-945-4396
Allied National, Inc.4551 W. 107th St. #100
Overland Park, KS 66207
This is an invitation to inquire about the Allied Funding Advantage plan. This is a limited description of the plans. See plan brochure and plan documents for complete details.
