How to Lower Healthcare Costs in the Face of Healthcare Reform Uncertainty
FEATURING PROFESSIONAL BENEFIT ADMINISTRATORS, INC.
July 27, 2017
Agenda
What We’ll Cover in Today’s Discussion
• Introductions
• What it means to be fully insured or self-funded
• How self-funding with a TPA is helping many companies deal with rising
healthcare costs (including broker fees/commissions)
• How you can control healthcare costs and put more control in the hands
of your members (even if you are already self-funded with an insurance
carrier)
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About the Speakers
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Webinar Host
Michelle Lanter Smith
Chief Marketing Officer
EPAY Systems
Featured Speaker
Ron Walter
Chief Executive Officer
Professional Benefit Administrators
EPAY Systems Overview
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Legal Disclaimer
The contents of this presentation should not be construed as legal advice or a
legal opinion on any specific facts or circumstances.
These materials are intended for general information purposes only, and you are
urged to consult a lawyer concerning your own situation and any specific legal
questions you may have.
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What’s the problem with group healthcare?
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• The cost of health care has risen 38.3% over the last 5 years (2017 Price
Waterhouse survey)
• During this period, most companies have had pressure to hold the line on
prices or to lower them
• For most companies, cost of medical plan is 2nd or 3rd largest annual
expense
• With the uncertainty of health care reform ─ or the reform of the reform ─
what should we do?
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The Current State…
Poll: How much have your health insurance costs gone up in the last year?WWW.EPAYSYSTEMS.COM 8
Let’s talk about the options…
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Fully Insured vs. Self-Funded
FULLY INSURED
• Insurer accepts full risk
• Insurer determines reserve levels
• Insurer manages reserve capital
• Insurer retains excess reserve/capital at year’s end
• Insurer manages and oversees all services vendors
• You pay fixed premium monthly that increases at every renewal
SELF-FUNDED
• Employer accepts some risk
• Employer determines reserve levels
• Employer manages reserve capital
• Employer retains excess reserves
• Employer or TPA manages service vendors (more control over type/quality/cost of care by service vendors)
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Self-Funded Options
SELF-FUNDED WITH ASO
• ASO arrangement with a carrier:
the carrier’s version of self funding
• ASO stands for Administration
Services Only
SELF-FUNDED WITH TPA
• Third Party Administrator – independent administrator
that works for the employer
• Total Plan Administration – provides all admin services
in addition to cost of claims management, claim edits
for improper billings, customer service, plan design
options, total transparency of cost.
• Transparency – disclosure of all costs - administration,
stop-loss, network access fees, commissions, claim,
discounts, subrogation savings, proper claims
administration savings, eligibility management savings.
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How can you lower your healthcare costs?
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• Get a way to offer meaningful
benefits in a highly-regulated
environment
• Get a way to put more financial
control in the hands of your members
Self-funding may be the answer!
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Why do more than two-thirds of all employers
choose self-funding over traditional insurance?
• The freedom to customize their health plan
• Addressing company objectives and employee
needs
• Gaining the potential for savings
• And finding ways to reduce future claim costs
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How does a self-funded health plan work?
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Rather than funding your plan
with non-refundable
premiums, a self-funded plan
treats claims as expenses.
What are the Benefits?
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• If claims are at or below anticipated levels, you immediately realize savings
• You avoid - reserves, contingency margins, insurance company profit,
advertising costs and most premium taxes
• ERISA governs all plans; self-funded plans can avoid state requirements
• You can avoid – many state and ACA-mandated coverages
• Transparency – you finally know what you are paying for in plan
administration, insurance, commission, claims
The total of administrative costs,
stop loss premiums and potential
claim costs are typically no
greater than the premiums paid
to an insurance company.
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Stop Loss Insurance Limits Your Liability
(Your Financial Umbrella)
• Specific stop loss covers excess
individual catastrophic claims
• Aggregate stop loss covers excess
claims for the entire covered group
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In a fully insured plan,
premiums are held and
invested by the carrier.
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In a Self-Funded Plan…
• You pay the fixed costs monthly
• The actual claim costs are paid weekly as
they come due
• You hold and invest the reserves
AND
• Service issues are usually less and easier
to resolve
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The maximum cost of a fully insured
plan is the total of all premiums
paid.
Fully Insured vs.
Self-Funding
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In a self-funded plan, the cost equals the
sum of…
• Administrative expenses
• Stop loss premiums
• Claims charged prior to any stop loss reimbursements
• In addition, there is always a maximum claims cap
Fully Insured vs. Self-
Funding
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In contrast to a fully
insured plan, a savings
will result if claims are at
or below the maximum
cost, in addition to lower
fixed costs.
Case
Example:
Company
with 203
Employees
100%
Non-Refundable
Premium
$2,267,186
Fully
Insured
Partial Self-
Funding
Administration
$112,783
Stop Loss
Premiums
$464,866
Actual Claims
$1,198,548
Actual Savings
$490,989
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In this case, an insurance company
would have retained $1,068,638.
$112,783
$464,866
$490,989 Your Profit
$1,068,638
Partial Self-
Funding
Administration
$112,783
Stop Loss
Premiums
$464,866
Actual Claims
$1,198,548
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If the plan were self-funded, the
employer would pay $577,649 for fixed
expenses and fund the monthly claims
totaling $1,198,548 for the year.
Partial Self-
FundingAdministration
$112,783
Stop Loss
Premiums
$464,866
Actual Claims
$1,198,548
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Your Savings Belongs to You
With a self-funded
plan, you would
keep the $490,989.
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Reserves Remain With Your Plan
A reserve is needed to cover
claims presented for payment next
year. However, a significant reserve
has been established with these
savings, with plenty left over.
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Another Benefit of
Self-Funding:
Access to valuable data on
plan utilization and claims.
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Poll: What is troubling you regarding your current health insurance program?WWW.EPAYSYSTEMS.COM 31
An Independent TPA will
Use Relevant
Information…
…to identify cost drivers and manage costs.
…help those with chronic health conditions
receive the on-going care they need.
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Over time, self-funded
plans can help promote a
culture of wellness that
benefits members.
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Once a self-funded plan is
in place, you will notice
little difference in the way
it operates.
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Moving from an insurance
carrier’s ASO program can…
• Lower your costs even more
• Gain more flexibility
• Gain greater transparency
• Avoid state required benefits
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What exactly does a third party administrator do?
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A third party administrator
handles your administrative
needs including:
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• Enrollment & eligibility
• Claims administration
• PPO & PBM contracting
• Management reporting
Regulatory Compliance
A TPA will keep your plan in compliance
with ERISA, HIPAA and ACA Restrictions
and all associated reporting
requirements.
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How self-funding may be
beneficial for your
company…
• Increased financial control
• Happier employees
• A healthier bottom line
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How do you begin with a self-funded plan with third party administration?
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• Review your current plan and prior claims
experience
• Determine the amount of risk your company
wishes to manage
• Determine an appropriate level of stop-loss
insurance to cover excess claims and limit
your risk
• Review the results and potential savings
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Integrated HCM to Help You Manage Your Employees and Benefit Programs
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