Self-Funding in the Wake of Reform Benefits Selling Expo April 6, 2011

Transcription

1 Self-Funding in the Wake of Reform Benefits Selling Expo April 6, 2011

2 Agenda New healthcare landscape PPACA industry impact Self-funded health plans Opportunities 2

3 The New Health Care Landscape

4 PPACA Industry Impact Broker/Consultant Compensation cuts More fee based Disintermediation Core product erosion Must adapt Show flexibility Insurance Carriers MLR Rate reviews Adverse selection Low penalties Guarantee issue No pre-x Fees and taxes Employers Higher premiums Less flexibility in design Reporting requirements Mandates >50 ees 4

5 Employer Post Reform Decision Long term view Play Employer Short term view Pay $2000/employee/year

6 The Future of Employer Based Healthcare Booz and Company study* CAGR: Uninsured 40-10% 20 Medicaid 41 6% 61 Medicare Other Public Individual % 3 4 8% 27 Small Group (<50 employees) 33-4% 25 Midsized/Large Group (50-1,000 employees) 56 0% 56 Jumbo Group (1,000+ employees) 69 1% w/reform The Future of the Health Insurance Demise of Employer Sponsored Coverage Greatly Exaggerated. Amounts shown in millions 6

7 Consequences of Health Care Reform Less flexibility Higher costs Less control Fewer plan options Quality of care Selffunding 7

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9 ERISA Plans Self-funded health plans The market ERISA (1974) 59% of employer lives 70 million lives Permitted employers to be licensed as insurers ERISA pre-empts state laws and some HCR Most 100+ employees 95%+ purchase medical stop loss insurance $4-5 Billion stop-loss premium in-force 9

10 Self Funding Prior to Reform Disadvantages Retain risk Responsibility Unpredictable cash flow Advantages Economic Flexibility Control 10

11 Mid-Size Employers Choose not to Self-insure Volatility Lack critical mass to be predictable Large swings in costs due to large claims or an unexpected frequency of claims How will the carrier react if you have a bad year? Commitment Self Insurance is a multi-year commitment Leap of Faith Hard to completely understand your risk profile Brokers Tough to sell Less compensation

12 After Reform Insured Selffunded 12

13 Creating A Plan Design Determine your benefits philosophy Rich benefits or no frills First dollar expenses or shared costs Workforce demographics Lots of families Young or older population Purpose behind the offering A tool to attract and retain employees Reduce absenteeism Improve workforce health 13

14 Building Blocks of Success Engaged employer Successful company Long term vision Focus on trend 360 degree feedback Willing to engage employees Willing to invest in success

15 Design Options True self funding Largest firms No stop loss purchased Partial Self-funding (high limit) Partial Self-funding (best fit solution) Partial self funding (low limit) Specific stop loss coverage only Levels set for the worst possible cases Coverage purchased has a value of reimbursement equal to that coverage Solved for mathematically or Identified by quoting specific and aggregate at multiple deductible levels Tool to protect the client while reserves are being developed Good first and second year solution Fully Funded Specific and aggregate purchased. Premium equivalent developed that funds aggregate to the maximum First years cash flow smoothed through aggregate accommodation and specific advance Spaagregate Uses fully funded and reinsured approach. Carrier takes severity risk, issues an aggregate only plan (premium equivalent plan). Forces financial discipline but cedes some underwriting gains to the carrier Aggregate only Similar to spaggregate but no internal specific coverage actually exists Very close to fully insured Least frictional cost savings 15

16 The Players

17 Potential Self-funded Plan Risks Specialty RX Administration Dialysis claims Organ Transplants Shock claims 17

18 The High Performing Plan Transforming your health plan to the standards that high performing companies: Spend 16%, or $1800 less per EE* View employee health as critical Create cultures to succeed Use measurements to improve outcomes Engaging employees and vendors Incentives for providers and employees High Performing Company * Towers Perrin 2010 study

19 Road to High Performance 1. True and accurate bills 2. Hold the line on discounts 3. Reactive cost control 4. Proactive cost control 5. Community based care models

20 Self-funded Opportunities Mid-market lives Simplify Packaged programs Supply side Providers Accountable Care Organizations (ACO) Community care models Alternative risk arrangements Captives Retention agreements Groups of employers 20

21 Prospects Any Employer Bend the cost curve Engaged in their business Social obligation Competing for labor Self-funded, but concerned about the unlimited exposure Hospitals and other large providers Tired of BUCA s Want to control community healthcare Groups of employers Risk retention groups workers comp Portfolio companies of equity funds Not for profits - Church groups Agency clients Associations electrical coops Physician groups 21

22 THERE S A BETTER WAY Sam Fleet, President/CEO AmWINS Group Benefits Division 16 International Way Warwick, RI Direct: sam.fleet@amwins.com Follow me on 22