Partial Self-Funding and Level Funding: Is it right for your clients?

Transcription

1 Partial Self-Funding and Level Funding: Is it right for your clients? Presented by Dean M. Hoffman Dean M. Hoffman, LLC May 17, 2018 Lincoln, Nebraska 1

2 Ground rules Questions as we go along Health Plan Acronyms Evaluations 2

3 Fully Insured or Partial Self-funding; Which one is it right for your firm? 3

4 Typical Fully Insured Model Interest Income Employer Group Pays Premium Insurance Company Provider Network Employee or Dependent incurs a medical claim at a healthcare provider Claims Administration Healthcare Providers Prescription Drug Utilization Review Disease/care Management Large Claim Pooling Lifestyle/Wellness Establish Reserves 4

5 Insured Winner Take All Advantages o Minimal Employer involvement o Level Budget o Bad claim year employer wins Disadvantages o Good claim year carrier wins o State Mandates o Limited access to data o Packaged services o No surplus carry forward 5

6 Fully Insured Incurred contract Fully insured contracts cover claims incurred during the policy year and paid during or after the policy year. January 1 December 31 6

7 Dispel the myths Self-funding is only for groups that are over 500 lives. Self-funding is 10x the amount of work as a fullyinsured plan. There are no administrative costs if a group is fully- insured. Self-funded plans avoid all of the ACA health care reform. All Self-funded groups are considered ERISA and escape state regulation 7

8 What is self-funding? Employer sets up fund to pay claims (usually through the services of a TPA or ASO vendor) Employer designs its own benefits plan Stop-loss protection for abnormal risks Partial/true self-funding 8

9 Growth of self-funding Started with Taft Hartley Act of 1947 for union groups In 1967, there were just 2,500 self-funded plans Employee Retirement Income Security Act: 1974 Placed regulation with federal government Private employer Self-funded plans under ERISA escape state regulations, including insurance regulation Public employer self-funded plans have some State regulation 9

10 Self-funding trend: Source: Employer Health Benefits Survey 2016 Exhibit Kaiser Family Foundation 10

11 Self-funding trend: 2017 Nationally % of covered workers were in a plan that was completely or partially self-funded. Regionally 2016 Northeast 61% Midwest 68% South 66% West 46% 23 Regionally 2017 Northeast 68% Midwest 63% South 64% West 45% Source: Employer Health Benefits Survey 2017 Exhibit Kaiser Family Foundation 11

12 Plan Sponsor Funding Methods 67.6% of employers surveyed are in a self-funded arrangement Source: Employee Benefits Survey Table 25, International Foundation of Employee Benefit Plans

13 SWINE FLU OUT BREAK IN NEBRASKA

14 Partial Self-funding The Basics 14

15 The advantage Cash flow benefit Lower operation cost Reduced carrier profit margin Risk charges Plan control and flexibility Stability Disease Management services Provider Network configuration 15

16 The advantage ROI on reserves Effective claim management Elimination of most state premium tax Plug and play services State mandated benefits avoided 16

17 State mandated benefits Most mandated benefits Least mandated benefits Rhode Island 70 Idaho 13 Virginia 70 Alabama 19 Maryland 67 Michigan 23 Minnesota 65 Hawaii 24 Connecticut 63 Utah 26 Most popular mandates Least popular mandates Mammography Screening 50 Breast Implant Removal 1 Maternity Minimum Stay 50 Cardiovascular Screening 1 Breast Reconstruction 49 Circumcision 1 Mental Health Parity 48 Gastric Electrical Stimulation 1 Alcohol & Substance Abuse 46 Organ Transplant Donor Coverage 1 Courtesy of Council of Affordable Health Insurance 17

18 The disadvantages Claims experience Budgeting for claim costs Plan termination Fiduciary and legal responsibility Employer involvement Lasering of large claims Timeline to lock final rates 18

19 Types of self-funded models Proprietary model Administrative Services Only (ASO) Unbundled model Third Party Administrator (TPA) Level Funded model (LF) ASO and TPA versions Reference Based Pricing model (RBP) ASO and TPA versions 19

20 Typical self-funded model Plan Sponsor Employee Contributions On site, near site or mobile Clinics TPA or ASO Stop loss protection Provider Network Prescription Rx Healthcare Dashboard Refunds above limits Claim account Healthcare providers Pays claims Stop loss Interest Income Telephonic/Facetime Medicine Domestic and International Medicine Direct Provider Contracting Disease and case management Lifestyle/Wellness Member Self service Price Transparency and Quality service Voluntary Benefits 20

21 What is stop loss? Specific coverage Insures the employer against a catastrophic loss incurred by one individual over a certain dollar limit. Example: transplants, leukemia, premature birth Aggregate coverage Insures the employer against unusually high overall claim levels for the entire covered group, due to high frequency or an unexpected number of large, catastrophic claims Aggregate generally consists of ordinary claims well care, colds, flu, prescription drugs, vision, etc. Only claims below the specific deductible on covered individuals are eligible. 21

22 Specific stop loss role Represents the employer s risk assumption Generally represents the individual plan participant s cost to the plan Defines the liability level of the stop loss arrangement Set at a level to provide appropriate protection for the employer, while allowing the employer to participate in the risk of the plan Must be set at a level to provide adequate protection for the aggregate attachment point 22

23 Plan Sponsor/Employer protection Specific Stop loss Medical Prescription Rx Aggregate Stop loss Medical Prescription Rx Dental* Vision* Short term Disability* * optional 23

24 Specific stop loss guidelines Number of covered employees Minimum per person Maximum per person $10,000 $50, $30,000 $75, $50,000 $125, $100,000 $200, $150,000 $250, $200,000 $2,000,000 24

25 Aggregate stop loss role Protects the employer from significant variation in the claims experience Aggregate coverage protects against utilization risk Specific coverage protects against catastrophic risk Specific claims not included 25

26 Specific stop loss role Coverage on the individual claim All eligible claims in excess of the individual stop loss level are reimbursed by the carrier All eligible claims below the individual stop loss level are the responsibility of the employer Carrier liability Employer liability Specific stop loss level $10,000 to $2,000,000 26

27 Aggregate stop loss Cap on claims liability for whole group Expected claim cost is established Aggregate is a percentage of expected claim cost Eligible claims exceeding aggregate stop loss level are reimbursed by carrier Maximum payment $1,000, % Corridor 130% (employer liability) Expected claims (employer liability) Maximum aggregate attachment point 27

28 What is Corridor? The difference between expected claims and the aggregate deductible; this is the risk the employer is accepting in its selffunded plan 28

29 Stop loss contract types Employers can choose from a variety of stop-loss contracts to meet their needs. 12/12 January 1 December 31 Incurred & Paid 12/12: Charges incurred and paid during the policy period 15/12 October 1 January 1 December 31 Incurred & Paid 15/12: Charges incurred up to three months prior and during the policy, and paid during the policy period 12/15 January 1 December 31 March 31 Incurred & Paid 12/15: Charges incurred during the policy year, and paid during and up to three months after the end of the policy period 29

30 Specific/Aggregate stop loss contract basis Contract terms Description 12/12 Incurred in 12; paid in 12 12/15 Incurred in 12; paid in 15 15/12 Incurred in 15; paid in 12 24/15 Incurred in 24; paid in 15 12/21 Incurred in 12; paid in 21 15/18 Incurred in 15; paid in 18 12/24 Incurred in 12; paid in 24 30

31 Underwriting requirements Small Group Claims data not required Evidence forms Large Group Paid claims (aggregate only) Two years paid claims Two years employee counts Large claims history (two years) Diagnosis Prognosis Ongoing conditions Manual rates 31

32 Plug and Play Services 32

33 THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK 33

34 Provider networks Geo access reports Provider access Network savings Disruption Performance guarantee Primary networks Proprietary o Broad network o High Performance/Narrow o Commercial Accountable Care Organization o Rental Secondary networks Travel or backdoor 34

35 Pharmacy benefit manager Rx Two PBM models Traditional Pass through Manages the drug aspects of the plan Access to captivated rates/discounts on drugs Often has cost management services available Generic drivers Safety checks Mail order Specialty pharmacy 35

36 Integrated health management Independent integration service will help the member to: o Benefit design o Patient education o Branded communication o Health needs assessment o Wellness education and programming o Primary care coordination o Disease management o Acute care coordination o Data mining and performance analysis 36

37 Telemedicine ~ Telephonic/FaceTime Goal: Decrease Urgent Care and low-complexity office visits Telephonic/Facetime service advanced version of call-anurse service Staffed by nurse practitioners who can diagnose and implement treatment including prescribing medications Available to plan members weekdays, weekends and offhours Improve patient and member convenience parents and patients can use service and not have to visit UC or physician office Deliver clinical quality care while reducing overall plan costs 37

38 Digital medicine 2.1 ~ Next Generation Mobile and Web Enabled Estimated 2:1 Return on Investment User friendly 12/7 on-demand virtual care by local licensed providers Asynchronous Medical Interview o Visit Summary o Provider Assessment Refer to Clinic 16% Diagnose and Treat 77% Direct to ER 2% 38

39 Cost transparency and quality Independent membership portal for opharmacy advisor for cost and effectiveness olocal, Regional and national price and quality measures for hospitals o Lifestyle/wellness library o Employee health self service o Video library o Healthcare basics 39

40 Emerging Partial Self-funded trends 40

41 ACA impact to Self-funding Only Self-funded plans are exempt from: Primarily from: The HIT Tax o Paying the HHS-calculated annual tax to which health insurers are subject starting in This amount will vary between insurer and is based on the prior years health insurance premiums received. 1% to 2.5% in % to 3.5% in % to 3.5% in 2016 Suspended in 2017 (help the market stabilize) Returning in As an example, one health plan has loaded their rates $4.70 PMPM for the HIT Tax alone EXAMPLE: 200 employee group (dependent factor 2.4) is 480 members. $2,256 per month or $27,072 annually 41

42 ACA impact to self-funding Both Self-funded and Fully Insured Plan Sponsors plans will pay Reinsurance contributions to fund the Transitional or Temporary Reinsurance Program o o 2014 $5.25 PMPM 2015 $3.50 PMPM o 2016 $2.19 PMPM (Ended at the end of 2016) PCORI (Patient Centered Outcome Research Institute ( ) $2.08 PMPY thru 10/15 $2.17 PMPY thru 10/16 $2.26 PMPY thru 10/17 $2.26 PMPY thru 10/18 Excise Tax (The Cadillac or Maserati Surcharge) o 40% excise tax on amount above threshold o Individual $10,200, Family $27,500, Indexed to CPI after 2018 o o Affects all plans, union, non-profit, government, corporations Insured or Self-funded o Postponed to

43 ACA impact to self-funding for small group Small group insured plans under 50 Low compensation employers subsidy eligible may disband Transitional relief small group polices ends December 31, 2018 High compensation employers will o Retain fully insured o Self funded or Level Funded 43

44 Small group Level Funded Plan Level funding ERISA TPA and ASO version Without surplus carry forward With surplus carry forward 50% 66 2/3% 100% 44

45 No Surplus carry forward 45

46 Surplus carry forward 46

47 Small group level-funded options Plan Option Silver Gold Platinum Specific Level $50,000 $50,000 $40,000 Annual Aggregate $51, $64, $38, Monthly Billing Employee $ $ $ Employee + spouse $ $ $ Employee + child $ $ $ Family $1, $1, $ Stop Loss Premium $4, $4, $3, Administration Expense $2, $3, $2, Claim prefunding $4, $5, $3, Total $11, $13, $8,

48 Small group Level funding Advantages o Full employee evidence required o Claims data not required needed to quote o Access to utilization reports o Some Flexibility of plan design o Escape some state premium tax o Avoid some state mandates o Level cash flow o Possible surplus refund o Some ACA exemptions 48

49 Small group level funding Disadvantages o o o o o o Full employee evidence required Full funding requirement Higher fixed cost component May not have hard run out Banking requirements may be cumbersome Fiduciary and legal o Who sends 1095 o o Laser of large claims COBRA under 20 lives 49

50 Small group level funded transition Fully Insured Level Spaggregate Funded Level SmartShare Funded/surplus Traditional Self-funded Funding Fixed costs Claims funding - full return of excess Claims Funding - shared retention of excess Claims funding - fully retained Graphs are a general representation and are not meant to show exact relationships between products. Other underwriting factors are important, including industry and specific level requested. 50

51 Small group Reference Based Pricing Reference based funding Recently entered the market ERISA TPA and ASO Versions Medicare Price Point 51

52 Reference based or Medicare pricing? Usually Physician only PPO Network Medicare price point 100%, 200%, 250% 98% accept payment; its the other 2%? Employee balanced billed Customer service lines defend pricing Demand that employee is indemnified from balance billing 52

53 Reference based or Medicare pricing? Advantages Plan Sponsor will save LOTS of money! 53

54 Reference based or Medicare pricing? Disadvantages o Balance Billing o Employee dissatisfaction o Area providers may deny non emergency service to those covered by this employer s plan o Plan Sponsors who wish to pay balance billed as claims exception, may due so without stop loss protection o HR Disruption o Use with extreme caution 54

55 Summary and Questions? ~Evaluations~ Dean M. Hoffman, LLC Mobile: