Health Care Reform. The Landscape for Large Employers Key Decisions and Considerations. Trudi Sharpsteen. Senior Consultant, Towers Watson.

Transcription

1 Health Care Reform The Landscape for Large Employers Key Decisions and Considerations Trudi Sharpsteen Senior Consultant, Towers Watson March Towers Watson. All rights reserved.

2 Discussion Guideline Health care reform High level timeline Key provisions and potential impact to large employer plans New options will be available to employers and employees The spectrum of opportunity Exchange and Medicaid options Affordability and the impact to employee options / employer cost Trends in employer thinking Relevant survey results What should/are employers considering? Planning and timing of key activities Financial modeling towerswatson.com 2013 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 1

3 Health Care Reform Overview High level timeline Key provisions and the impact to large employers 2013 Towers Watson. All rights reserved.

4 Reform: An Overhaul of the Insurance System Employer Plans million Uninsured 50 million Medicaid/ CHIP 40 million Medicare 41 million or Insurance Market Reforms Guarantee Issue, No Health Status Underwriting Employer benefits exceed minimum plan and affordability limits for employees* Employer pays government and employees use Exchanges Aetna Exchange** CIGNA BC/BS United Kaiser Co-op Medicaid*** / CHIP Medicare Private Payer Rates Public Payer Rates Delivery System Reforms Medicare Payment Reform Multitude of Fees Wellness/Prevention Incentives Health IT/Medicare Payment Reforms Hospitals Physicians Rx Manufacturers Other Providers Source: U.S. Census Bureau. Does not depict 15 million now with individual insurance expected to move to Exchange or other sources. * Employees may decline employer s plan in favor of Exchange-based coverage, but they may obtain federal premium subsidies for Exchange-based coverage only if employer coverage does not meet minimum requirements or is unaffordable. ** Low- and middle-income premium and out-of-pocket cost subsidies available up to 400% of federal poverty level. ***The States poisiton on Medicaid will impact the number of currently uninsureds who will be eligible to enroll in Medicaid towerswatson.com 2013 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 3

5 Health Care Reform: High Level Timeline PPACA signed into law Individual health coverage mandate Employer play-or-pay mandate Health benefit exchanges operational Premium and cost-sharing subsidies Medicaid eligibility expanded in some states Additional group health plan mandates Summary of Benefits and Coverage (SBC) and uniform glossary disclosure Supreme Court ruling on constitutionality of individual mandate President Obama re-elected Congress remains split, setting stage for ongoing political bargaining Sales of health insurance across state borders permitted W-2 issued using 2012 health plan data Medicare payroll tax increased for higher-wage employees $2,500 cap on employee pretax contributions to health FSAs Notice to employees of exchange-based coverage options (late summer/fall) States may open exchanges to large employers Adult child medical coverage to age 26, no lifetime dollar limits/ restricted annual dollar limits on essential health benefits, no preexisting condition exclusions for enrollees under age 19, coverage of preventive care without participant cost sharing, no rescissions 40% nondeductible excise tax on high-cost, employer-sponsored health coverage ( Cadillac plan tax) Employers are also rethinking total rewards and seeking new options for care delivery and improved value towerswatson.com 2013 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 4

6 Key Health Care Reform Components and the Employer Impact Key Element Provisions Impact Individual Mandate Health Insurance Market Reform Health Benefit Exchanges New and Expanded Public Plans Legal residents of U.S. (with limited exemptions) must maintain minimum essential coverage from any source or pay a tax penalty Low income individuals eligible for premium subsidies or Medicaid Guaranteed issue, renewal, no rescissions, premium rating restrictions, other consumer protections New public insurance markets (Exchanges) for individual and small-group coverage will be available in each state Provides guaranteed access to private insurance policies with premium and cost-sharing subsidies for lower-income individuals who don t have access to affordable employer insurance Federal government operates the Exchange if a state does not establish one Medicaid eligibility extended to all those with incomes up to 138% of Federal Poverty Level (FPL) ($15,000 individual/$31,000 family of four) but only for those states that agree to adopt this expanded Medicaid eligibility standard Employees who previously opted out of an employer s plan may opt in, increasing cost Coverage will be more readily available outside of employment and may fill a need for part-time employees or early retirees Employer coverage will be compared to options in the market (hence SBCs) Employers will need to educate employees about Exchange options (summer/fall 2013) Insurers offering plans in the Exchange will market very heavily, trying to influence individuals to purchase their plan Exchange experience may be spotty, and there will likely be bumps in the road early on in the process Likely will lead to product and network innovation including ACO and PCMH models, narrow networks In states that expand Medicaid eligibility, low-wage workers may choose to enroll in Medicaid rather than the employer plan May change the employer s risk pool towerswatson.com Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only.

7 Key Health Care Reform Components and the Employer Impact Key Element Provisions Impact Premium and Cost-sharing Subsidies Employer Mandates and Shared Responsibility Federal premium subsidies for individuals earning up to 400% of the FPL Cost-sharing subsidies to reduce out-of-pocket expenses Available only for coverage obtained through Exchanges, not through employer-sponsored plans If an adequate and affordable plan is offered to either you or your spouse by an employer, you will not be eligible for subsidies Employers either offer minimum essential coverage (MEC) to substantially all (95% of) full-time employees (FTE) and their children or pay an annual non-tax deductible penalty up to $2,000 per FTE If employer coverage is not affordable and employee receives a federal subsidy in the Exchange, employer pays non-tax deductible penalty of $3,000 per each FTE who meets these conditions Plan benefit maximums no longer allowed, and out-ofpocket limits within HDHP limits Auto-enroll new full-time employees in coverage and continue enrollment of current employees (delayed, 2015 the earliest) Subsidized benefits and premiums available on the Exchange may be more attractive for lowwage workers than the employer-sponsored plan especially for those under 200% of FPL Need to understand impact on population and consider contribution strategy alternatives Population covered by the employer plan may change, given migration to Medicaid and Exchanges Employer must offer MEC to substantially all FTEs to avoid $2,000 penalty PEPY (based on member entity only) Employer must offer affordable, minimum coverage of 60% actuarial value (AV) to avoid $3,000 penalty Potential workforce planning considerations (should employer manage some FTE to <30 hours?) Administrative requirements will increase as employers are required to monitor actual hours worked Auto-enrollment will likely increase covered population (postponed) towerswatson.com 2013 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 6

8 Key Health Care Reform Components and Employer Impact Key Element Provisions Impact Revenue Raisers 40% nondeductible employer excise tax on high-cost employer-sponsored health coverage New and increased Medicare HI payroll taxes on higherincome taxpayers Increased taxes and fees charged directly to self-funded and insured group plans (additional details in appendix) Employer will want to manage away from the excise tax in a play environment Employer will need to budget and pay in fullyinsured premiums for transitional reinsurance fees of $63 per member in 2014 (amounts reduce in 2015 and 2016) Employer will need to budget for patient-centered outcomes research fee of $2 per member (fee indexed at medical inflation after 2014 through 2018) Health insurance tax fees begin at 1% to 2% of insured premium in 2014, increasing to 3% to 4% of premium ultimately, with some impact on cost of stop-loss reinsurance policies used by self-insured plans. Insured employers may reconsider their funding approach. Payment Reform New, legislatively enabled reimbursement methods under Medicare will also change the provider landscape and how doctors/hospitals are paid, resulting in new delivery channels Health care delivery, network reimbursements and possibly configuration will change as focus shifts to value-based payments, integrated care, population health management and efficiencies towerswatson.com 2013 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 7

9 Care Delivery and Network Contracting is Changing Too: Reimbursement Models Move From Pay for Volume to Pay for Value High Global or Partial Capitation Low Provider Risk Discounted Fee-for- Service (DFFS) Strong DFFS with Performance Incentives Bundled Payments Current Provider Market Readiness Pay-for- Performance Shared Risk/ Shared Savings Limited By 2015, potentially 30% of reimbursement models will have evolved beyond DFFS (and some suggest up to 60%) towerswatson.com 2013 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 8

10 New Options are Available to Employers and Employees Spectrum of opportunity for employers New options for employees Exchanges and Medicaid 2013 Towers Watson. All rights reserved.

11 Pay or Play: The Decision Will Vary Based on Employer Profile Play Spectrum of Opportunity Pay Compete heavily to attract/retain talent Health care benefits are a core part of Employee Value Proposition Healthy workforce is viewed as a key productivity driver Employee Value Proposition requires health commitment Examples Technology Health Care Diverse margins Mix of low/high-wage earners Health benefits are a material consideration Workforce requires a diverse range of occasional and part-time workers Awaiting an inflection point Examples Financial Services Low-end Manufacturing Low margins Majority of employees are low-wage earners Many employees may be Medicaid-eligible Higher turnover Health care benefits are not core to Employee Value Proposition High number of part-time or seasonal workers Examples Retail Hospitality towerswatson.com 2013 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 10

12 The Spectrum of Opportunity: Different Paths are Possible Play Pay Continue to Play Play and Redirect Selective Play Pay and Redeploy Pay and Exit Play by meeting HCR requirements Optimally manage design and delivery to sustain an employersponsored plan Define inflection points or contingencies for future exit Complement with additional, robust health resources based on philosophy Play by meeting HCR requirements Structure contributions to encourage low-wage earner qualification for subsidies Pay $3,000 penalty for those who exit and are subsidized by the Exchanges Offer an employersponsored plan to only a portion of the population Direct ineligible employees to Exchanges Offer an employersponsored plan to select group Pay $2,000 penalty for all FTEs Where needed, gross up Highly Compensated Employee (HCE) if plan is deemed to be discriminatory Discontinue employersponsored plan Pay $2,000 penalty for all FTEs Direct employees to Exchanges Provide monetized value (e.g., Defined Contribution) in whole or part Discontinue employersponsored plan Pay $2,000 penalty for all FTEs Direct employees to Exchanges Provide no financial subsidy towerswatson.com 2013 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 11

13 Employees Have New Options Too Family income under 133% of FPL Family is eligible for Medicaid If employer coverage is available Family income from 133% to 400% of FPL Family is eligible for subsidy in Exchange If employer coverage is available, but either inadequate (<60% benefit) or unaffordable (premiums >9.5%) Family income over 400% of FPL Family may purchase unsubsidized coverage in Exchange If employer coverage is available Family may choose the employer plan or Medicaid Family may choose the employer plan or subsidized coverage in Exchange If employer coverage is available and adequate and premiums are affordable Family may choose the employer plan or unsubsidized coverage in Exchange 2011 FPL Single Individual Family of 4 100% $10,890 $22, % $14,484 $29, % $43,560 $89,400 Family may choose the employer plan or unsubsidized coverage in Exchange Note: Coverage purchased through the Exchange will always be made with after-tax dollars towerswatson.com 2013 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 12

14 Premium and Out-of-Pocket Subsidies: Some Employees Could Benefit From Subsidized Exchange Coverage Family income as % of FPL Premium Subsidies Maximum premium cost as a % of family income < 133% 2.0% 133% - 150% 3.0% - 4.0% 150% - 200% 4.0% - 6.3% 200% - 250% 6.3% % 250% - 300% 8.05% - 9.5% 300% - 400% 9.5% Premium subsidies Defined as cost of second lowest cost Silver plan less specified % of family income Advanceable credit offsetting cost of Exchange coverage Based on cost of second lowest cost Silver plan offered in participant s region Interpolate between specified percentages for income within percentage range If other plan elected, defined subsidy offsets premium cost of option elected Family income as % of FPL Out-of-Pocket Subsidies These amounts are illustrative, produced by applying the law s OOP formula to the 2010 HDHP OOP limits Actuarial Value Max OOP Single/Family < 133% 94% $1,983 / $3, % - 150% 94% $1,983 / $3, % - 200% 87% $1,983 / $3, % - 250% 73% $2,975 / $5, % - 300% 70% $2,975 / $5, % - 400% 70% $3,987 / $7,973 Out-of-pocket subsidies Apply solely to Silver coverage; creates strong incentive for subsidy eligible individuals to elect Silver coverage Specific design enhancements will vary by plan For individuals at lower end of income scale, makes Silver coverage more generous than Platinum Cost-sharing subsidies for those with family income over 250% FPL cannot reduce value of coverage below Silver plan level Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. towerswatson.com 13

15 Exchange Options Plan Offerings Platinum 90% Value Gold 80% Value Silver 70% Value Bronze 60% Value Relative plan value: Each plan must pay on average the specified percentage of total eligible charges; actual design features will vary by carrier and plan; typical employer plan in TW survey provides relative value of about 83% so Gold plan will offer value closest to employer average Underwriting and design requirements: Guaranteed issue; no medical underwriting; no preexisting condition exclusions; must provide "essential health benefits"; cover preventive care at 100%; no lifetime or annual limits; maximum out-of-pocket limits $5,950/$11,900 (linked to HDHP) Rating requirements: Rates for oldest age bracket can be no more than 3x rates for youngest age bracket; rates for smokers cannot exceed 1.5x rates for nonsmokers; rates will vary be geography; financial incentives for wellness and health promotion can rise as high as 30% of plan cost Catastrophic coverage: Individual-market policy with essential benefits but with (i) HDHP statutory OOP cost-sharing and (ii) coverage for at least 3 office visits; may have reduced level of actuarial value. Available to (i) those under age 30 and (ii) those exempt from individual mandate because individual s required contribution exceeds 8% of household income or due to certified hardship Cost-sharing subsidies for those with family income over 250% FPL cannot reduce value of coverage below Silver plan level Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. towerswatson.com 14

16 What is the Employer Community Thinking? Relevant survey results from the 18 th Annual Towers Watson/National Business Group on Health Employer Survey on Purchasing Value in Health Care 2013 Towers Watson. All rights reserved.

17 About the Survey Tracks health plan strategies and practices of U.S. employers with at least 1,000 employees 583 respondents 11.3 million full-time employees 8.5 million are enrolled in health care programs Spend $12,136 per employee Equates to $103 billion in total annual health care expenditures in 2013 Number of Full-time Workers Employed by Respondents 21% Region Where the Majority of Benefit-eligible Workforce is Located 23% 19% 13% 20% 20% 25% 24% 19% 1,000 2,500 2,500 5,000 5,000 10,000 10,000 25,000 25, % National Northeast South Midwest West 4% 9% 30% Industry Groups Energy and Utilities 7% Financial Services 16% General Services Health Care 8% IT and Telecom Source: 2013 Towers Watson/National Business Group on Health Employer Survey on Purchasing Value in Health Care. Survey was conducted between November 2012 and January towerswatson.com 2013 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only % 13% Manufacturing Public Sector and Education Wholesale and Retail

18 Change is on the Horizon Companies plans to recalibrate health care strategy for 2014 and beyond Nearly 50% of employers expect significant or transformative change by 2018 We have developed a strategy 16% 3% 8% We are currently developing a strategy 58% 44% 45% We have not yet begun developing a strategy but will do so 19% We have no plans to recalibrate our strategy 7% No change or small change Significant change Modest change Complete transformation Source: 2013 Towers Watson/National Business Group on Health Employer Survey on Purchasing Value in Health Care. towerswatson.com 2013 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 17

19 Employers are Rethinking Retiree Medical Only 13% of companies say subsidized health care benefits for retirees will be an important component of their overall value proposition three to five years from now Make changes to plan subsidy (e.g., cost-sharing) 45% 7% 13% Facilitate access to individual/group Medicare plans through Medicare Coordinator 29% 13% 23% Include HSA for actives as part of retiree medical strategy 46% 7% 11% Have dollar cap on benefits 50% 5% 6% Convert subsidy to a retiree medical savings account 20% 8% 26% Convert Medicare Rx Coverage from RDS Program to Group Part D Plan (Employer Group Waiver Plan [EGWP]) 26% 11% 16% Action taken/ Tactic used in 2013 Planning for 2014 Considering for 2015 or later Note: Based on respondents that provide financial support or access to coverage in 2012 and excludes responses of not applicable. Source: 2013 Towers Watson/National Business Group on Health Employer Survey on Purchasing Value in Health Care. towerswatson.com 2013 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 18

20 Employers are Redefining their Financial Commitment 42 % 18 % 82 % Increase employee contributions in tiers, with dependent coverage at higher rate than single coverage Use penalties (e.g., increased premiums or deductibles) for nonparticipation in health management programs/ activities in 2014 Currently offer new hires no financial support for pre-65 retiree medical coverage 42 % 15 % Use surcharges for tobacco users at roughly $50 per month Expand number of coverage tiers 37 % 20 % Structure employee contributions based on employees completing specific tasks Use spousal surcharges (when other coverage is available) Roughly $100 per month Source: 2013 Towers Watson/National Business Group on Health Employer Survey on Purchasing Value in Health Care. towerswatson.com 2013 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 19

21 The Excise Tax Means Employers are Managing Their Health Care Costs Today to Stay Within a Corridor of Costs Tomorrow % Excise Tax Cap Ceiling ($10,200/$27,500) Manage cost trend Improve workforce health and reduce risk factors Create better consumers and better behavior Optimize vendor performance Manage high-cost claim risk Minimize non-core benefits Minimum plan of 60% actuarial value and affordable to employees Plan value needs to be low enough to avoid the excise tax Plan costs need to be minimized, while still attracting and retaining employees Plan design needs to be high enough to avoid penalties towerswatson.com 2013 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 20

22 Take-up in ABHPs Takes Off 80% 70% 60% 50% 40% 30% 20% 10% 0% 79% 66% 47% 51% 54% 59% 53% 39% 33% 21% 11% 5% 2% * We define an account-based health plan (ABHP) as a plan with a deductible offered together with a personal account (i.e., health savings account or health reimbursement arrangement) that can be used to pay a portion of the medical expense not paid by the plan. ABHPs typically include decision support tools that help consumers better manage their health, health care and medical spending. *Planned for Source: 2013 Towers Watson/National Business Group on Health Employer Survey on Purchasing Value in Health Care. towerswatson.com 2013 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 21

23 Employers are Considering Total Replacement ABHPs Given Favorable Costs and Trends $13,000 Enrollment rates in $12,368 $12,214 $12,000 $11,790 $11, $11,000 $10,806 $10,000 $10, $9,000 Non-ABHP Less than 20% 20% to 49% 50% to 74% 75%+ Total Replacement 0.0 Total Plan Costs Cost Trends, 2013 (after plan and contribution changes) Source: 2013 Towers Watson/National Business Group on Health Employer Survey on Purchasing Value in Health Care. towerswatson.com 2013 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 22

24 Employers are rethinking employee dependent subsidies Increase employee contributions in tiers with dependent coverage at higher rate than single coverage 42% 19% Use spousal surcharges (when other coverage is available) 20% 13% Expand number of coverage tiers 15% 9% Require spouses to purchase health insurance through their employer plan before enrolling in your health plan Increase employee contributions per each dependent covered Exclude spouses from enrolling in your health plan when similar coverage is available through their own employer Eliminate/don t offer subsidy for spousal coverage (provide access only) 7% 5% 4% 8% 1% 4% 11% 10% Key Fact: Average spousal surcharge is $1,200 per year ($100 per month). The top 10% of companies charge $200 per month, while the bottom 25% charge $50 per month. In place 2013 Planned 2014 Source: 2013 Towers Watson/National Business Group on Health Employer Survey on Purchasing Value in Health Care. towerswatson.com 2013 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 23

25 What Should Employers Be Considering? Assessing the options and the financial impact Planning and setting strategy 2013 Towers Watson. All rights reserved.

26 Financial Modeling: Workforce Characteristics and Comparison to Federal Poverty Levels ILLUSTRATIVE In 2014, Families earning less than 400% of FPL will be eligible for subsidies in public Exchanges, and Families earning less than 133% will be Medicaid-eligible (Note: For administrative reasons, individuals projected at up to 138% of FPL may be provided Medicaid eligibility) FPL is indexed to CPI, and differs by the number of members in the family A small number of employees may be eligible for Medicaid and a large number may be eligible for some level of federal subsidy in the public Exchanges (absent the presence of adequate employer-sponsored coverage) These subsidized plans may replace the need for a corporate response to benefit access for lower-paid workers Half of full-time workers will not be eligible for any federally subsidized health care in 2014 Estimated 2014 FPL Single Individual Family of 4 133% $15,827 $32, % $47,599 $97,690 towerswatson.com 2013 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 25

27 Modeling: Financial Impact to Company, Employees ILLUSTRATIVE If we look only at the cost to the employer, the pay options provide an opportunity for cost reduction but it would significantly impact the employee value proposition $80,000 $70,000 $60,000 $50,000 $40,000 $30, Employer Spend in Thousands $20,000 $10,000 $0 Current Situation Optimal Play Play & Redirect Selective Play Pay & Redeploy Pay & Exit Cost of Pay & Redeploy Employee Subsidy $0 $0 $0 $0 $49,877 $0 Tax Impact of Penalties $0 $0 $2,656 $6,919 $6,919 $6,919 PPACA Penalties & Excise Tax $0 $0 $4,932 $12,850 $12,850 $12,850 Employer Plan Costs $50,650 $53,627 $46,715 $47,278 $0 $0 towerswatson.com 2013 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 26

28 What Do Employers Need to Do? Should workforce be restructured? All in 2013 Should we Play or Pay next year? Are OOP limits compliant? Do eligibility guidelines need to be changed? All in 2014 Should we Play or Pay next year? Plan for and communicate auto enrollment? How will we define Essential Health Benefits? Early 2015 Reporting on employersponsored plans How will look-back status be determined? 1) Elimination of Notice on Exchangebased coverage options How will we define Essential Health Benefits? Have we budgeted for the new fees? Provide information to EEs on affordability and adequacy of plans (2012) EE notices on transparency in coverage and ensuring quality of care Notification to IRS on member count for TRF (7/31/13) Should we consider using (8/1/13) a Private Exchange? Reporting on health insurance coverage Autoenroll employees? towerswatson.com 2013 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only.

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30 Agenda Introduction Health Insurance Market overview Operational considerations How do we control costs and manage the risk? What is Trending in the self funded world? Questions 2

31 About First Niagara Benefits Consulting (FNBC) Part of First Niagara Financial Group (FNFG) and First Niagara Risk Management (FNRM) Offices located in New York, Pennsylvania and Connecticut Buffalo, Rochester, Syracuse, Albany, Philadelphia, Pittsburgh, Norwalk Full Staff dedicated to employee benefits Full range of employee benefit brokerage/consulting services 3

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33 Fully Insured Market Limited Plan and Carrier Options Many employers trapped in fully insured jail No access to claim data Pool rated with margins State mandated benefits No ability to manage risk Significant rate increases every year No justification or reasoning from the carriers 5

34 Advantages of Self Funding know where healthcare costs are coming from and use data to better manage and control costs State mandated benefits eliminated or reduced Able to manage risk Access to data Single plan across all states State premium taxes lowered Better cash flow Groups with better risk profiles can realize savings Employer bears the cost of their own risks 6

35 Education, Financial Management & Operational issues Employer Claims Payer and Network / Population Health Management Stop Loss and Health Care Risk Management 7

36 Most Large employers are self funded Why? Transparency employers know where all the dollars are going, what losses they have and can focus on loss control efforts Control employers can add plan controls that improve outcomes and lower costs and eliminate state mandates Flexibility employers can tailor benefits to meet their needs and have a single plan for employees working in other states Stop Loss Pricing size provides predictability (lower risk premium) Retain carrier profit Cash flow advantage no prefunding of self insured claims 8

37 Stop Loss Protection Unlimited Stop Loss Carrier Per Individual $50,000 SIR $0 Frequency of Claims Member Aggregate 9

38 Operational Considerations TPA selection Managed care network selection Secondary networks Out of network claim negotiation Specialty resources Identify and focus on controllable health risks 5% of members drive 90% of cost Implement and reinforce effective strategies Use technology to improve efficiencies and outcomes Design well coordinated programs 10

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40 Total Population Management Risk Level Chronically Ill % of Benefit Costs by Risk Level 25% Strategy by Risk Level Large Case Management Rx Management Disease Management RN Coaching Diagnosed Healthy/At Risk 55% 20% Disease Management Predictive Modeling RN Coaching Smoking Cessation Obesity Management Maternity Management Comprehensive Wellness Health Risk Assessments Diagnostic Screenings Education & Preventive Care Weight Management 12

41 Health and Wellness Programs Affect Your Premiums Insurance Premiums have increased at a compounded rate of 9% for the last 10 years* High Performing companies trend is at or below 3%** *According to Kaiser Family Foundation **According to Towers Perrin s annual study of health insurance costs 13

42 40 Companies Participate With 42,000 Active Members Identified 518 Cancer or Pre-Cancer Cases 90% of Cases were Diagnosed and Treated for Less Than $8,000 Opt-Out Percentage is Less Than 1% Accounts Saved an Average of 32% More After Adding Comprehensive Wellness Saved $5 Million in 2011 on Early Cancer Detection and Treatment Alone 14

43 What is Trending in the self funding world? Benefit Captives PBM pharmacy services Wellness with Patient Activation Measure Urgent Care initiatives Health Care Risk Management Predictive Data Analysis 15

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45 The Power of Group Captives Taking Control of your Costs of Health Care

46 Who is Captive Resources? Over 25 years of experience Independent consultant Administer 27 group captive programs Represent over 2,600 shareholders Combined premiums exceeding $1 Billion

47 What Stop Loss Captives mean to Self Insurance Marketplace? Expands self insurance/stoploss universe Complement existing stop loss structure Facilitates employer transfer to self funding

48 Captive Model Employer s Total Health Care Costs Wellness Network STOP LOSS CAPTIVE Plan Design Claim Management

49 Captive Model Additional Cost Impact Worker s Comp Absenteeism Productivity Employer s Total Health Care Costs Wellness Sharing Ideas STOP LOSS CAPTIV E Plan Design Claim Management

50 Why A Captive Should Be Important To You? Ally with Like Minded Employers Improved Health Management Paradigm Shift We CAN Impact Costs of Health Benefits Participate in Greater Level of Risk Return of Carrier Underwriting Profits Reduces Need to Increase Retention/Risk Reduced Costs Gain Leverage in the Marketplace Greater Predictability Through Spread of Risk Control Over Insurance Destiny

51 Defining Success Impacting the Total Cost of Healthcare The Other 85% Predictability Outperform Industry Cost Trends Captive Dividend Distribution De-emphasize Cost Shifting vs. Promotion of Healthy Behavior Health Care Risk Management Vendor Integration Healthy and Productive Workforce and Dependents Benchmarking Results

52 Flexibility Use your current plan design if desired Choose the specific stop loss limit that fits your company best Obtain aggregate stop loss protection if desired Select your own third party administrator Access to local, regional and national PPO networks

53 Health Care Risk Management Development of Health Management/Wellness Platform Based on Member Direction and Industry Best Practices Health Management/Wellness Workshops Topical Presenters and Breakout Sessions Networking/Member Interaction Well Health Webinar Series Member Website Buying Groups

54 Captive Flow Profits Insured Broker Your TPA Stop Loss Carrier Claims Admin. Network Access Case Management Pre-certification Client Services Wellness Programs Bill Audits Stop Loss Carrier Retained risk Your TPA Claimant

55 Specific Claims Layers (Per Person Per Policy Year) Stop Loss Policy $200,000 IN EXCESS OF SIR MEMBER AGGREGATE ATTACHMENT POINT Catastrophic Stop-Loss Coverage Per Claim Captive Co-Participation Member Assessment Member Loss Fund (each member s) Specific Deductible SIR Employee Share CAPTIVE CO- PARTICIPATION BETWEEN MEMBERS WITH AGGREGATE STOP-LOSS

56 Decision Making Process What to Consider: Do I want to participate in the risk/reward associated with Insurance Can I gain greater access to Healthcare risk management thru Captive Are all members of captive like minded when it comes to risk assumption Are all members engaged in Health Care risk management

57 Decision Making Process Program Flexibility Premier Service Provider Partners Control Health Care Costs Can be Controlled Cost Control through Group Purchasing Power Captive Savings Model Member Owned and Directed Excellent Networking and Sharing of Ideas Working Together Toward Zero Trend!

58 Questions Contact Doug Hayden Phone