MEDICAL FUNDING CONCEPTS

Transcription

1 MEDICAL FUNDING CONCEPTS APRIL 24, 2013 John C. McDonough Benefits Consultant 7225 Northland Drive, Suite 300 Minneapolis, MN Medical Funding Concepts Agenda Fully Insured Health Reimbursement Arrangement (HRA) Health Savings Accounts (HSA) Stacked HRA/HSA Partially Self-insured Which type is best for you 1 1

2 MEDICAL FUNDING CONCEPTS FULLY INSURED Fully Insured Concepts Most widely used insurance type Entire claim risk in transferred to the carrier Guaranteed cost Incurred contracts 3 2

3 Fully Insured Sample Plan Design In-Network Benefits Option 1 In-network Option 2 In-network Calendar Year Deductible None $750 single $1,500 family Coinsurance 80% coinsurance 80% coinsurance Out-of-pocket Maximum Preventive Health Care Visits $1,600 single $3,200 family 100% Coverage Deductible does not apply $2,000 single $4,000 family Office Visits/Urgent Care $35 copay $35 copay Retail Health/ Convenience Care $0 copay $0 copay 100% Coverage Deductible does not apply Lab/Pathology/ Diagnostic Imaging 80% 80% after deductible In/Out Patient Hospital Services 80% 80% after deductible Emergency Room $75 copay $75 copay Prescription Drugs Generic Preferred Brand Non-preferred Brand $9 copay $40 copay $90 copay $9 copay $40 copay $90 copay 4 Fully Insured Incurred Contracts Jan Jan Jan Jan month Fully-Insured Contract Incurred Claims 24 month Fully-Insured Contract Paid Claims 12 month Next Contract Year Incurred Claims 24 month Next Contract Year Paid Claims 5 3

4 Fully Insured Advantages and Disadvantages Advantages Employers can effectively budget costs on an annual basis Easy for employees to understand Pre-determined premium is paid monthly irrespective of claim costs Incurred claim basis makes changing carriers fairly simple Disadvantages Premiums include highest percentage of taxes and assessments - MN Premium Tax: 2.0% - MCHA (MN high risk pool): 3.0% - Conversion 1.0% Total 6.0% Premium paid may exceed total cost of insurance 6 MEDICAL FUNDING CONCEPTS HEALTH REIMBURSEMENT ARRANGEMENTS 4

5 Health Reimbursement Arrangements (HRA) Concepts Employer purchases a large deductible to reduce overall premium costs Self-funded policy used to offset employee s out of pocket costs HRA Plans are strictly governed by the IRS Solely employer-funded Employer s budget determines contribution amounts HRAs are usually associated with high deductible health plans (HDHP) A number of other features are available but not widely used Rollovers Ability to pay COBRA premiums Etc 8 Fully Insured Sample Plan Design where HRA funds 75% of Deductible In-Network Benefits Coverage purchased In-network Benefits realized by Employees In-network Calendar Year Deductible $2,000 $0 single $0 family Coinsurance 75% coinsurance 75% coinsurance Out-of-pocket Maximum Preventive Health Care Visits $3,000 single $6,000 family 100% Coverage Deductible does not apply $1,500 single $3,000 family 100% Coverage Deductible does not apply Office Visits/Urgent Care 75% coinsurance 75% coinsurance Retail Health/ Convenience Care 75% coinsurance 75% coinsurance Lab/Pathology/ Diagnostic Imaging 75% coinsurance 75% coinsurance In/Out Patient Hospital Services 75% coinsurance 75% coinsurance Emergency Room 75% coinsurance 75% coinsurance Prescription Drugs Generic Preferred Brand Non-preferred Brand $9 copay $40 copay $90 copay $9 copay $40 copay $90 copay 9 5

6 Health Reimbursement Arrangements (HRA) Claim Process Member incurs a claim Provider submits claim to Insurance Carrier Insurance Carrier processes the claim and applies to deductible Insurance Carrier sends claim to HRA administrator HRA administrator processes claim Employer verifies HRA plan costs on a weekly basis and Administrator pays the claim from a shared account Member receives an Explanation of Benefits from both the Insurance Carrier and the HRA Administrator Member is then billed from provider for the balance 10 Health Reimbursement Arrangements (HRA) Advantages and Disadvantages Advantages Lower guaranteed cost of insurance Introduces employees to consumerism Fairly easy to administer Disadvantages Employer assumes entire risk of the HRA account Can be more confusing for employees Requires another Summary Plan Description (SPD) Currently, HRAs will pay two PCORI fees ($1 pmpy for 2014) 11 6

7 MEDICAL FUNDING CONCEPTS HEALTH SAVINGS ACCOUNTS Health Savings Accounts (HSA) Concepts Not a health plan HSAs are accounts that can be established with a qualified high deductible health plans (HDHP) Individual tax preferred accounts that can be established to fund unreimbursed medical expenses Combination of a flexible spending account (FSA) and a 401(k) If pre-tax dollars are taken out of the account to pay for eligible expenses, there is no tax penalty paid (similar to FSA) Unspent funds roll over year to year and earn interest (similar to a 401(k)) Maximum Contributions for 2013 are $3,250/$6,

8 Fully Insured Sample Plan Designs In-Network Benefits Option 1 In-network Calendar Year Deductible $1,500 single contract $3,000 family contract Option 2 In-network $2,500 single $5,000 family Coinsurance 100% coinsurance 100% coinsurance Out-of-pocket Maximum Preventive Health Care Visits $1,500 single $3,000 family 100% Coverage Deductible does not apply $2,500 single $5,000 family 100% Coverage Deductible does not apply Office Visits/Urgent Care After deductible, 100% coverage After deductible, 100% coverage Retail Health/ Convenience Care After deductible, 100% coverage After deductible, 100% coverage Lab/Pathology/ Diagnostic Imaging After deductible, 100% coverage After deductible, 100% coverage In/Out Patient Hospital Services After deductible, 100% coverage After deductible, 100% coverage Emergency Room After deductible, 100% coverage After deductible, 100% coverage Prescription Drugs Generic Preferred Brand Non-preferred Brand After deductible, 100% coverage After deductible, 100% coverage No Coverage After deductible, 100% coverage After deductible, 100% coverage No Coverage 14 Health Savings Accounts Claim Flow Member incurs a claim Provider submits the claim to Insurance Carrier Insurance Carrier processes the claim and applies discounts Insurance Carrier applies the claim amount to the deductible Insurance Carrier sends EOB to member Provider bills the member Member pays the claim using HSA account MARSH & McLENNAN AGENCY LLC April 26,

9 Health Savings Accounts (HSA) Unembedded vs Embedded Deductibles Unembedded Deductible For HDHPs (HSAs) with deductibles less than $2,500, the deductible is determined by contract type rather than individual Family members have to hit the family deductible before benefits would be eligible One member could incur the entire family deductible Once the family accumulates their deductible, benefits are payable Embedded Deductible For deductibles equal to or greater than $2,500, members covered under family contracts can maintain single level protection In order to hit the family deductible maximum, more than one person must have claims 16 Health Savings Accounts (HSA) Advantages and Disadvantages Advantages Introduces consumerism Employees own the account; it s portable Unspent funds rollover year to year and earn interest Contributions can be made by employee and/or employer Contributions can be changed throughout the year Disadvantages Can create short term financial hardship Mandated deductible levels are higher than most other plans Pharmacy claims must apply to deductibles Complex tax implications Limitations on who is eligible to establish an account Carrier pricing is conservative at this time 17 9

10 MEDICAL FUNDING CONCEPTS STACKED HSA/HRA MARSH & McLENNAN AGENCY LLC Stacked HSA/HRA Concepts Employer buys a Qualified HDHP with a higher deductible (usually $5,000+) or a plan that provides 75% coinsurance after deductible Employees maintain an HSA eligible plan which allows them to contribute to an HSA Employer implements the HRA to help cover costs in excess of HSA deductible 19 10

11 Stacked HSA/HRA Sample Plan Design Single coverage: $2,500 deductible - Employer funds $500 - Member Funds $2,000 $5,000 out of pocket maximum - Employer funds $2,000 - Member funds $500 Total maximum out-of-pocket is $2,500 HRA Next $10,000 Carrier pays 100% of eligible expenses over $12,500 Employee funds 5% to $500 max Carrier pays 75% up to $7,500 HRA funds 20% to $2,000 HSA First $2500 Employee funds $2,000 Employer funds $ Stacked HSA/HRA Advantages and Disadvantages Advantages Lowest guaranteed cost Encourages consumerism Disadvantages Higher administrative costs Confusing for employees Requires significant time for education 21 11

12 MEDICAL FUNDING CONCEPTS PARTIALLY SELF-INSURED MARSH & McLENNAN AGENCY LLC Partially Self-insured Concepts Employer takes on a greater risk by hiring a Claim Administrator to process their claims Cost Components are broken into two groups Fixed- Administrative costs, re-insurance, network management, etc Variable- Claims - Under most plans, the employer assumes a 125% risk corridor for their claims Employer actually funds the claims Fixed costs are billed monthly Claims are processed and paid weekly Contracts are based on claims paid date in addition to incurred date 23 12

13 Partially Self-insured Sample Plan Design Employer has the ability to create their own plan designs, but most closely mirror fully insured options 24 Partially Self-insured Incurred and Paid Timeline Jan Jan Mar Jan Mar Jan months Self-Funded Contracts Incurred Claims 15 months Self-Funded Contract Paid Claims 12 months Next Contract Year Incurred Claims 24 months Next Contract Year Paid Claims 25 13

14 Partially Self-insured Stop Loss Insurance Specific Stop Loss Insurance (Individual Stop Loss) Protects employer when eligible claims during the policy year on any one individual exceed a specific liability limit - When this occurs, you are reimbursed by the insurance company Aggregate Stop Loss Insurance (Group Stop Loss) Protects employer from eligible claims for the entire group that exceed the annual aggregate liability limit If eligible claims for entire group exceed the aggregate liability limit (the 125% corridor), insurance company will reimburse for those claims 26 Partial Self Insurance Advantages and Disadvantages Advantages Greater flexibility with plan design Employer pays actual claim costs Approximately 5% reduction in fixed fees due to avoidance of some taxes Disadvantages More administration for the employer Cash flow can be an issue Claims could exceed expected levels Can be costly to convert back to a Fully Insured Contract 27 14

15 MEDICAL FUNDING CONCEPTS Which Plan type is best? MARSH & McLENNAN AGENCY LLC Which plan type is best? There are a few examples where one type fits a specific group Large, non-governmental employers with sophisticated HR teams usually benefit from being Partially Self Insured A healthier smaller clients (less than 200 employees) that is getting a significant increase due to a high claimant may benefit from an HRA At RJF/MMA, we think it is important that you are aware of the various options and are able to select the plan type that best aligns with your objectives and your culture 29 15

16 Legal/regional regulatory statement to be added here if required. 16