Self-funding vs. Fully Insured Plans. 1 In California POMCO, Inc. DBA POMCO Administrators, Inc.

Transcription

1 Self-funding vs. Fully Insured Plans In California POMCO, Inc. DBA POMCO Administrators, Inc.

2 POMCO Quick Facts Established in 1978 Top 5% Professional Benefits Administrators Average client tenure exceeds 10 years Managing nearly $2 billion in premium equivalents Over 300,000 members nationally 500 employees Office locations: Syracuse, Albany, Buffalo, Binghamton, Rochester, Watertown, White Plains, NYC; Chattanooga, TN and Los Angeles CA 2

3 Why POMCO Experience Meeting the unique needs of clients for over 37 years We re a Service Provider not a Carrier Focused on Cost Management Strategies References that validate our service excellence Capabilities Dedicated and Accountable Claims / Customer Service Best-in Class Partner Integration (will work with your current partners) State-of-the-Art Technology, Reporting, and Analysis Tools Consultative, action-oriented support and guidance Commitment Multi-year rate guarantee We re a proven Business Solution Partner not just a Claims Administrator 3

4 Self-Funded vs Fully Insured Fully Insured The employer purchases health coverage from an insurance company and pays monthly premiums Premiums are determined annually based on employee group size, claims experience and carrier s desired profit margin The insurance company assumes the risk for the payment of claims The insurance company is regulated under state law Self-Funded The employer self funds rather than paying monthly premiums The employer assumes the risk for payment of the employees (and their dependents) health claims Employer pays medical claims as they are incurred like other corporate expenses The employer typically contracts with a third party administrator (TPA) for claims adjudication and other services These plans are subject to federal law 4

5 Medical Dental Vision Prescription drugs Short-Term Disability Workers Compensation Self-Funded Benefits For those that are not typically suitable for self-funding Life Insurance Accidental Death & Dismemberment Long-Term Disability

6 Components of a Self-Funded Program vs. a Fully Insured Program Fully Insured Program Retention Claims Reserves Self-Funded Program Fixed Costs Variable Costs 6

7 Claims Administration For the administration of a self-funded plan, there are two options: Third Party Administrator (TPA) Mostly independent entities whose primary line of business is the administration of employee health benefit plans Administrative Service Only Providers (ASO) Typically subsidiaries of insurance carriers 7

8 How Does Self-Funding Work? The first step is to partner with a Third Party Administrator (TPA) to administers the plan. TPA responsibilities include: Maintaining eligibility Adjudicating and paying claims Customer service Marketing, placing and reporting stop loss coverage Utilization management / Utilization Review / Case Management Preparing claim reports Access to provider network(s) Implementation of a pharmacy benefit management program Assist the broker/consultant and client with plan design Assist with employee meetings and enrollment Stop Loss Insurance is arranged to protect against large losses A Plan Document is prepared by the TPA which contains all provisions of the plan including eligibility, benefit coverage, plan exclusions and limitations Reporting is provided to the employer which allows the measurement of the health program in order to manage the program 8

9 Stop Loss Insurance Stop loss insurance provides protection against catastrophic or unpredictable claims. Under a stop loss policy, the employer is reimbursed for health claims that exceed certain limits. Two forms of stop loss: Specific Covers each plan participant (employee and dependent) Protects the employer against catastrophic claims by individuals that exceed a dollar limit (the specific deductible or individual deductible). The specific deductible is based on the employer s size and risk tolerance. Aggregate Provides an annual cap for the employer s claims liability (the annual attachment point). This is typically set between 115% and 125% of the expected paid claims. The stop loss carrier reimburses the employer after the end of the year for non-catastrophic claims above the determined amount. 9

10 Types of Stop Loss Contracts 12/12 incurred in 12 months, paid in 12 months 12/18 incurred in 12 months, paid in 18 months Run-Out Contract 15/12 incurred in 15 months, paid in 12 months Run-In Contract Paid/12 paid in 12 months, regardless of incurred date 10

11 Specific Reinsurance $50,000 Specific Deductible--Example Upon reaching the specific stop loss limit, the reinsurance carrier will Reimburse the Plan for excess losses according to the stop loss contract Annual Total of Individual s Claims $30,000 Paid by Stop Loss Carrier (excluded from Aggregate loss fund) $50,000 $35,000 $5,000 $50,000 $50,000 $20,000 11

12 Aggregate Reinsurance $480,000 Aggregate Deductible--Example Aggregate stop-loss insurance limits the total maximum exposure for medical claims and insures losses through a reinsurer The aggregate is calculated based on expected claims Expected claims = Previous claims + medical trend + corridor 12

13 Prescription Drugs An employer s prescription plan can be approximately 25% or more of the cost of the company's group health plan Fully insured carriers pass along minimal prescription drug discounts to employers and keep any pharmaceutical rebates. With a self-funded plan with POMCO, the employer receives 100% of the rebates and prescription drug discounts.

14 The POMCO Solution: Self-funding Flexibility in plan design Benefits are customizable to meet the employer s work force and goals Plan administration specific to the client Cash Flow Employer does not prepay for coverage (i.e. premiums) Funds are not held for unreported and pending claims No security deposit or advanced funding required by POMCO The employer avoids state premium tax of 3% - 5% Reduces the long-term impact of the Affordable Care Act tax impacts Health Insurance Fee Section 332 Assessment required Carrier profit margins and risk charges are eliminated Risk management effectiveness through Stop Loss insurance Access to data through enhanced technology and reporting Plan benchmarking and analysis 14 Cost and utilization controls in place

15 Is Self-Funding Right for Your Client? The only real way to determine if self-funding is appropriate for your client is for us to provide an analysis. In order to accomplish this, we will need the following data: Census for all Employees (in excel format) Include: Name, Date of birth, Gender, Tier (Single, Family), Plan, Status (Active, Waiver, Retiree, COBRA, Part-Time), Zip Code Copy of Current Summary of Benefits Premium History Current and 2 Years Prior Claims Experience (Medical and RX by month) Current and 2 Years Prior Current Large Claims Data (if available) Over $20,000 The analysis is done at no cost and no obligation 15 Note: Client must have at least 101 enrolled in the medical plan

16 16 Self-funding enables employers to control rising healthcare costs through plan design

17 Vanessa Flynn VP, Client Consulting Stacey Hotaling Director, Business Development Thank You 17