Self-Funded Health Plan Designs and Stop-Loss Insurance. Specifically for Businesses With Five or More Employees

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1 Self-Funded Health Plan Designs and Stop-Loss Insurance Specifically for Businesses With Five or More Employees

2 Why Self-Fund? Controlling the cost of healthcare is among the top challenges of small to mid-size employers. LIMRA 2011 Trends In the United States, 2011 Between 2008 and 2010, the trend to self-funding by small employers increased by as much as 20 percent, according to PricewaterhouseCoopers. 25.7% of employers with employees self-insure; 13% of employers with <100 employees self-fund. Department of Health & Human Services Report, 3/ % of primary decision makers say they will likely move to some sort of self-funded insurance option as a way to combat rising healthcare costs. Small Business and Self-funding: Dispelling Some Myths March 2011, by George J. Pantos, Esq. 2 McKinsey Quarterly, June 2011

3 Why Starmark HealthyEdge SM? Lower costs Opportunity to get money back Flexibility in plan design Knowledge on how claim dollars are spent an alternative to status quo! 3

4 What is Starmark HealthyEdge SM? Opportunity for future savings should medical costs be lower than funded Stop-loss protection Aggregate and specific stop-loss protection against large unexpected claims from the entire (or whole ) group or just one individual Starmark HealthyEdge self-funded plan designs offer: Predictable monthly payments Three surplus option choices 4

5 Key Advantages of Starmark HealthyEdge SM Group size: 5+ enrolled employees Stop-loss insurance and self-funded plan designs are bundled less hassles Many specific stop-loss levels from which to choose Aggregate Claim Liability Summary Report is mailed to the group monthly Claim utilization reports provide transparency on how healthcare dollars are used No lasers (carve out specific risks in stop-loss contract) 5

6 Starmark HealthyEdge SM Stop-Loss Specific and Aggregate $10,000 $15,000 $20,000 $6,500 $50,000 Specific stop-loss levels State-mandated minimum levels apply $25,000 $30,000 $45,000 $40,000 $35,000 Aggregate stop-loss attachment point Groups with 5-9 enrolled employees: 150% of expected claims Groups with 10+ enrolled employees: Varies from 120% to 125% of expected claims State-mandated minimum levels apply 6

7 The Total Cost of HealthyEdge 3 Key Components Self-funded claims aggregate claim liability or claim prefund Administration expense Stop-loss premium specific and aggregate stoploss coverage 7 Total Cost of HealthyEdge

8 3 Surplus Options 1 Excess surplus* is credited to the group as an administration fee credit Group receives 2/3 as an administration fee credit at renewal to be applied in the new plan year. Starmark receives 1/3 as a delayed administration fee. No credit at termination. 2 Excess surplus* is credited to the group as an administration fee credit or cash Group receives 2/3 as an administration fee credit at renewal to be applied in the new plan year. Starmark receives 1/3 of surplus as a delayed administration fee. Cash refund provided for on-anniversary termination. No credit or refund for off-anniversary termination. 3 Excess surplus* is refunded as cash Cash refund provided in the form of a check. This is the only surplus option available in KY, NM, NV, UT and WV. 8 *All surplus options are subject to a terminal liability reserve adjustment.

9 Claim Runout and Surplus 15-month runout period (12/27) ensures practically all covered claims are processed during the runout period Terminal liability reserve is the amount set aside to pay claims during the runout period. Surplus accounting is performed as follows: Groups with 5-24 enrolled employees Performed in 4 th month after renewal (16 th month) Groups with 25+ enrolled employees Choice of performing determination in either the 1 st or 4 th month after renewal (13 th or 16 th month) Option is selected at time of quote Note: In KS, surplus is determined in the 16th month regardless of group size. 9

10 Financial Example #1 $200,000 ($160,000) $40,000 ($4,000) $36,000 ($12,000) $24, Annual aggregate claim liability Less actual aggregate claims Aggregate claim liability surplus Less terminal liability reserve adjustment Net aggregate claim liability surplus Delayed administration fee payable to Starmark Administration fee credited to group (or cash), depending on the surplus option selected Dollar figures are used for illustration purposes only.

11 Financial Example #2 $200,000 ($235,000) ($35,000) ($5,000) ($40,000) Annual aggregate claim liability Less actual aggregate claims Aggregate claim liability Less terminal liability reserve adjustment Total aggregate claim liability Dollar figures are used for illustration purposes only. In this example, the $35,000 aggregate claim liability is covered through aggregate stop-loss coverage. Trustmark also funds the $5,000 terminal liability reserve adjustment. 11

12 Application of Administration Fee Credit The administration fee credit is applied to the administration fee on the bill several times during the next plan year. If the administration fee credit is greater than the yearly administration fee, the difference will be refunded as cash at the end of the second plan year. 12

13 State-Mandated Benefits 13 Self-funded plans are not required to cover state insurance mandated benefits. The plan designs include many mandated benefits, just not at levels required state-by-state in a fully insured plan. Some states require non-erisa governed plans (churches, municipalities, and charter and public schools) to cover some state-mandated benefits; therefore, HealthyEdge is available to non-erisa groups only in AZ, MI, NC, NE, SC, UT and WY.

14 Other Important Benefits with Starmark Express Connect paperless employee enrollment Nationwide network access True personal service, including a welcome call for each new group Optional plan benefits YourCare health and wellness program CareChampion 24/7 health advocacy service Inpatient Admission and Outpatient Surgery Access Fee Maternity Supplemental Accident For costs and further details, including exclusions and limitations, contact your Starmark representative. Plan design availability and/or stop-loss coverage may vary by state. Self-funded plans are administered by Starmark, and stop-loss insurance is provided by Trustmark Life Insurance Company, Lake Forest, Illinois. 14

15 Trustmark and Starmark Trustmark, an employee benefits company for 100 years, helps people increase well-being through better health and greater financial security. The Trustmark Companies serve more than 2 million covered lives or plan participants. Trustmark Life Insurance Company is rated A- (Excellent) by A.M. Best. Starmark is a distinguished leader in group healthcare benefits offering self-funded and fully insured plan designs. With paperless employee enrollment, health and wellness programs, nationwide network access and seamless HRA administration, Starmark is the choice in employer healthcare benefits. 15 S a-er ( )