Collaborating to Decrease Health Insurance Costs

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1 Collaborating to Decrease Health Insurance Costs

2 Outline Simple Steps to Complex Problems Agents, Brokers, and Consultants Quick Historical Overview Next Steps Copyright Mark J. Becker & Associates, LLC 2

3 Agents, Brokers, and Consultants Overview I am here Pro Bono I am not paid for what I m about to say. I am not commissioned. I will not financially or materially benefit from the decisions made regarding healthcare or other benefits. Mark J. Becker, GBDS, HIA, CBC President Mark J. Becker & Associates, LLC Copyright Mark J. Becker & Associates, LLC 5

4 Agents, Brokers, and Consultants Overview Agents captive approach Brokers multi-line approach Consultants independent client-based approach MJBA is a nonpartisan consulting firm. We exist to help employers, and their employees, make informed decisions on how to manage their benefits. We do not promote product for remunerations; our advice is free from such remunerations that cloud objectivity. We represent the buyers best interest legally, financially, contractually. Copyright Mark J. Becker & Associates, LLC 5

5 Your Team Overview Mark J. Becker, GBDS, HIA, CBC President. BBA Finance Iowa State University. Since Underwriter and Manager of Corporate Accounts, Principal Financial Group; Account Executive, Holmes Murphy & Associates; Executive Vice President David P. Lind & Associates; Captain United States Army, Iowa Army National Guard. Mark s background provides clients with experience in group underwriting and the financial management of their employee benefit plans. Strategic planning, risk analysis, funding tool management and overall education in the purchase of employee benefits are the skills Mark brings forth in advocating for and advising clients. Lisa J. Wilson, Director of Client Services. BA Political Science Iowa State University. Since 1985 Medical/Dental Claims Analyst, Flexible Spending Specialist, Unit Leader, Training Coordinator, Holmes Murphy & Associates. Service Associate, David P. Lind & Associates. Lisa s experience in training, human resources, customer service, flexible spending administration and account management brings a host of skills to clients in the organization and delivery of client services. Copyright Mark J. Becker & Associates, LLC 5

6 Your Team Overview Keri K. Farrell-Kolb, JD, MBA. Director of Compliance. JD - Drake University Law School. MBA- Drake University College of Business Administration, BA-Drake University. Since 1997 Member of Employee Benefits Group, Nyemaster Goode, P.C. and Business, Corporate and Estate Planning Group, Pingel & Templer, P.C. Keri s legal background and command of the law with focus on health and welfare plan compliance provides invaluable education and advice to clients in aspects of the IRS Code, ERISA, HIPAA, COBRA and health care reform (ACA). Brenda J. Plantz, HIA, MHP Assistant Vice President. BA Education Central College. Since 1985 Trainer and Claims Supervisor, Account Executive, Provider Relations, Wellmark BCBS; Benefits Coordinator, Delta Dental of Iowa. Service Associate, David P. Lind & Associates. Brenda brings a background of education and training, claim analytics, contractual document organization, review and development in providing a full scope of account management services for clients. Copyright Mark J. Becker & Associates, LLC 5

7 Your Team Overview Dena M. Cox, CBC Director of Operations. Since 1992 Medical/Dental Claim Processor, Adjustment Analyst, Claim Auditor, Appeal Auditor, CIGNA HealthCare. Service Assistant, David P. Lind & Associates. Dena s expertise in the development of analytical and audit analysis tools and processes provides MJBA with the data management and reporting necessary to educate clients and advocate on their behalf during strategic planning, renewal processes and solicitations to the marketplace. Copyright Mark J. Becker & Associates, LLC 5

8 History Cumulative Changes $1, $1, $1, $1, $ Monthly Claim Cost per Employee Poly.(Monthly Claim Cost per Employee) Linear(Monthly Claim Cost per Employee) Medical Plan Trend Lines & Changes 7/1/06: 0% Increase No Plan Changes 7/1/08: 3.3% Decrease No Plan Changes 7/1/10: 16.7% Increase Raised OV copay to $20 Implemented Rx Deductibles and Copays No Plan Changes to HDHP 7/1/12: 1.3% Increase No Plan Changes $ $ $ $- 7/1/07: 10.7% Decrease Moved from ISEBA to Wellmark Direct 7/1/09: 16.6% Increase RFP: renewed with Wellmark No Plan Changes 7/1/11: 7.8% Increase No Plan Changes 7/1/13: 1.3% Increase No Plan Changes except ACA Copyright Mark J. Becker & Associates, LLC 7

2 Trend Utilization has fluctuated mostly due to large claims.

9 History Trends 1 Rate Increases Cost increases have varied. The last three years are lower than Iowa s average. 2 Trend Utilization has fluctuated mostly due to large claims. Recent trends show a downward trend. Copyright Mark J. Becker & Associates, LLC 3

10 History Plan Designs $6,000 Deductibles 3 Plan Design Adjustments A. Promoted Stewardship Healthy Lifestyle & Behaviors Education about actual cost Understanding of benefits Plan design fostered excessive cost, promoted unnecessary usage, and increased premiums for all a spiral effect was occurring. $5,000 $4,000 $3,000 $2,000 $1,000 $- BCSD PPO DPLA PPO Kaiser PPO BCSD HDHP DPLA HDHP Kaiser HDHP Single $500 $1,386 $799 $2,500 $2,645 $2,003 Family $1,000 $2,874 $1,854 $5,000 $5,349 $4,079 $60 $50 $40 $30 Rx Copays $20 $10 $- BCSD PPO DPLA PPO DPLA HMO/ POS DPLA All Plan Kaiser All Plans Tier 1 $10 $9 $9 $9 $10 Tier 2 $25 $28 $29 $28 $9 Tier 3 $40 $44 $44 $44 $52 Copyright Mark J. Becker & Associates, LLC 4

13 Benefit Basics Common Terms: DeducUble amount you pay out of your pocket in a calendar year, before benefits are available. Coinsurance % of medical expenses you pay a[er the deducuble is met, unul you reach your out- of- pocket maximum. Copyright by Mark J. Becker & Associates, LLC All Rights Reserved 13

14 Benefit Basics Common Terms: Copayment fixed amount (e.g. $20) you pay at the Ume of service when you receive covered services. Out- of- Pocket Maximum (OPM) maximum amount you pay for covered services each calendar year. DeducUble, coinsurance and office copays (in 2014) apply to the OPM. Rx copays do not apply to the OPM (unul 2015). Once your OPM is sausfied, most services are covered in- full, through the end of the benefit period (calendar year). Copyright by Mark J. Becker & Associates, LLC All Rights Reserved 14

15 Benefit Basics Plan Design Terms: EssenUal Health Benefits Ten categories of health care services that all qualified health plans must include as defined by ACA; can also not apply any annual limits to: Ambulatory PaUent Services PrescripUon Drugs Emergency Services RehabilitaUve and HabilitaUve HospitalizaUon Laboratory Services Maternity and Newborn Care PrevenUve Care & Disease Mgmt Mental Health/Substance Abuse Services Pediatric Services, including oral and vision Copyright by Mark J. Becker & Associates, LLC All Rights Reserved 15

16 Benefit Basics Plan Design Terms: Qualified Health Plan As defined by ACA a plan that contains: 1. essenual health benefits 2. provides a minimum value of 60% - cover at least 60% of allowable claim costs 3. passes the affordability test cannot exceed 9.5% of employee W2 wage for single coverage on lowest cost plan provided Copyright by Mark J. Becker & Associates, LLC All Rights Reserved 16

17 Group Insurance Basics Insurance is a product of contract. It determines the level of risk (legal, financial, administrauve, etc.) transferred or accepted. To purchase the right insurance, one must know their risk. IdenUfying the risk Assess what risk to retain or transfer Determine the level of risk to insure Copyright by Mark J. Becker & Associates, LLC All Rights Reserved 17

18 Group Insurance Basics Risk Transfer Tools - Plan design - shares risk with employees through individual uulizauon Premium Sharing shares via socialized rates/ contribuuons Contract determines how much risk remains with the contract holder (aka: policy holder). For example, rates are part of a contract as are provisions like pooling points (fully- insured) reinsurance contracts (self- insured). Funding tools determines the amount of risk, cost of risk, and Uming of risk. Copyright by Mark J. Becker & Associates, LLC All Rights Reserved 18

20 Funding Basics Fixed Costs Transfer of Financial & Legal Risk Variable Cash Flow Fully-Insured 100% Pooled BCSD plan purchased from Wellmark. Premium rate is issued by insurance carrier. Minimum premium and many other variauons of funding tools. Split- funded plan refers to a parual self- funding and falls in the middle. Self-Insured Rate not always issued by insurance carrier, but broken up among many different fees. Copyright by Mark J. Becker & Associates, LLC All Rights Reserved 20

21 Funding Basics Funding Terms: Fully- Insured Insurance Carrier accepts 100% of the claim risk. Group s claim experience is pooled with all other fully- insured group customers. Pooling Point Transferring risk at specific level of purchased protecuon. BCSD pooling point is $35,000. Protects the plan against claims exceeding $35k for each covered individual. Insurance within the insurance. Legal Compliance is the responsibility of an insurance carrier for the most part when fully- insured. Copyright by Mark J. Becker & Associates, LLC All Rights Reserved 21

22 Funding Basics Funding Terms: Self- Insured Employer accepts 100% of the claim risk Reinsurance Specific Reinsurance transferring risk at a specific level of purchased protecuon. Similar concept as pooling. Insurance within the insurance. ProtecUon for plan on each individual. Aggregate Reinsurance protects the plan for claim amounts exceeding the expected claim level for the enure group. Legal Compliance is the responsibility of the employer for the most part when self- insured. Copyright by Mark J. Becker & Associates, LLC All Rights Reserved 22

23 Funding Basics ParUal Self- Funding: Combines two funding methods underscoring two insurance plans into one, usually: Uses a fully insured plan. Uses a self- insured plan. Can use various funding tools to accomplish the same thing. Copyright by Mark J. Becker & Associates, LLC All Rights Reserved 23

24 Pricing Basics The cost of insurance adjusts every so o[en (usually annually) in order to true- up the plan and maintain solvency. This process is called a renewal as the goal is to renew the insurance contract in a way that sausfies both the policy holder and insurer. Copyright by Mark J. Becker & Associates, LLC All Rights Reserved 24

25 Pricing Basics Premiums include money for the following components: 1. Claims these are the submiped expenses that are covered under the plan/ contract. 2. AdministraUon Claim processing, customer service, uulizauon management, sales/ markeung, premium taxes, broker fees, carrier margin, etc. 3. Other floaung charges these are other cost components that can float around as vendors treat them differently. Pooling charges/reinsurance charges protecuon for high claim costs Legal Fees - i.e. ACA legislauon Trend a variable load used to project future claims many more. Copyright by Mark J. Becker & Associates, LLC All Rights Reserved 25

26 Pricing Basics We believe renewals should never be a surprise to the customer. Tracking claims experience and calcula<ng in other components of premium based on informa<on from the insurance carrier should always allow for a snap shot view of how the health plan is performing and what an expected rate increase might be. An art not a completely accurate foolproof science. Copyright by Mark J. Becker & Associates, LLC All Rights Reserved 26

28 Medical Offset Snap shot today, would suggest a small single digit increase. Next few months: More claims to be included Pooling charge within Admin expected to increase substanually Trend to add for third qtr not known yet Possibility for addiuonal claim impact due to ACA changes. Copyright by Mark J. Becker & Associates, LLC All Rights Reserved 28

29 Loss RaUos Loss RaUo Claims paid out as compared to premium paid in. Gross Loss Ra/o Cum Premiums Cum Claims Cum % of Claims to Premium $15,000, % 75% $10,000,000 50% $5,000,000 25% Gross Loss RaUo Includes total claims without pooling reimbursements Net Loss RaUo Includes claims a[er adjustments for pooling reimbursements Long Term Net Loss Ra/o Since July 2001 $15,000,000 $10,000,000 $5,000,000 $0 68% 100% 75% 50% 25% PYTD Net Loss Ra/o $500,000 $400,000 $300,000 $200,000 51% $100,000 0% 100% 75% 50% 25% Desirable loss rauo range is what one wants. $0 0% Cum Premiums Cum Net Claims Loss RaUo $0 0% YTD Premiums YTD Net Claims Loss RaUo Copyright by Mark J. Becker & Associates, LLC All Rights Reserved 29

30 Next MeeUng Request for Proposal currently underway. Coordinate with Renewal. Set Guiding Principals regarding the medical plan offering: Discuss opuons for dealing with a medical rate increase and the future stability of the plan Plan sharing arrangements? Update plan performance Imposed changes due to ACA AddiUonal benefit offerings? Copyright by Mark J. Becker & Associates, LLC All Rights Reserved 30

31 Copyright Mark J. Becker & Associates, LLC THANK YOU!

BCSD Insurance Advisory Committee: Collaborating to Understand and Manage Health Insurance Costs

BCSD Insurance Advisory Committee: Collaborating to Understand and Manage Health Insurance Costs Outline Simple Steps to Complex Problems 1 2 3 The Team The Process Target Results 2 The Team Overview Insurance