Defined Contribution Training

Transcription

1 Defined Contribution Training Part 1: Understanding the Defined Contribution Concept Private Exchanges and Uninsured Employees The Revolution in Employee Benefits

2 Goals of Today s Training 1. Understand the current market trend in health insurance 2. Discuss how this is being Impacted by ACA 3. Explore how Defined Contribution HP and private exchanges are shaping the future 4. Talk about the needs of producers to help their clients through this paradigm shift

3 1. Group Employer 145 million (incl. dependents) How American s Get Health Insurance 2. Personal Policies 40 million (up from 12 million in 2002) 3. Medicare 47 million (incl. 12 million in MA) 4. Medicaid 45 million (incl. 8 million over 65 or disabled 5. Uninsured 40 million (PC #, closer to 10 million) Group ER Medicare Uninsured Personal Policies Medicaid

4 Percentage of Firms Offering Health Benefits, By Size Firm Size workers 59% 48% workers 76% 71% workers 92% 85% workers 95% 93% All Small (3-199) 68% 59% All Large (200+) 99% 99% All Firms 69% 60% -9%

5 A Trend That Will Continue Pension Plan 401 K Defined Contribution Increased Cost Sharing HDHP/Consumer Driven Individual Purchase Defined Contribution

6 Brief History Post WWII wage and price and controls Huge tax advantage for Group Plans Prior to WWII - Limited employer involvement, catastrophic plan designs, local BC/BS, individual/family driven Mostly GI, carriers profited most from Group plans personal plans cost twice as much as group Traditional plan design low deductibles and copays, less RX & tech kept costs lower

7 Brief History State and Federal mandates heavier burden on group plans (maternity) than personal plans Medical UW 45 states dropped GI for personal policies Personal coverage in those states now costs ½ (on avg) the cost of group Evolution of CDHP Higher deductibles and out of pocket costs Plan designs with CDHP s include: Spending accounts (FSA,HSA, HRA) Gap/supp insurance

8 Brief History Increased migration of healthier population aided by internet and availability of info Small group GI within stateregulated medicalrating bands Healthier employees leave group for personal plans Federal Tax advantages of group extended to personal coverage ( ) 2002 Health Reimbursement Arrangements (HRA) (105) 2009 Premium only Plans(POP) (125) Some state small group rules conflict

9 Affordable Care Act (ACA) Mandated Benefits Mandated Purchase Mandated GI Set minimum levels of coverage for all policies Creating generic national health insurance When government sets minimums For all Americans SCOTUS reviewing For Employers Affordable coverage For all policies including personal policies Children in 2010 All in 2014

10 Affordable Care Act (ACA) Mandated Benefits What will be the affect on health insurance premiums? Set minimum levels of coverage for all policies Creating generic national health insurance When government sets minimums Mandated Purchase Mandated GI For all Americans SCOTUS reviewing For Employers Affordable coverage For all policies including personal policies Children in 2010 All in 2014

11 How ACA Affects Employees an Employers Mandated benefits drive up premium costs Individual Mandate tax penalty (effective subsidized cost of bronze plan) Subsidies through State Exchanges Employee with family of 4 (see kff.org) Income Annual Premium Expected Total Cost Gov t or ER Premium Subsidy $20,000 $0 (Medicaid) $20,000 $20,000 $40,000 $2,160 (5.4%) $20,000 $17,840 $80,000 $7,600 (9.5%) $20,000 $12,400

12 Employers at Renewal 2012, 2013 Increase EE portion of premium Eliminate classes of eligible s Increase deductibles or reduce coverage (by class) Eliminating Employer Sponsored group plans Informed Employers putting DC or PRA in place

13 Future of Defined Contribution ACA stays More personal policies State Exchanges Private Exchanges 2012 will determine a lot

14 EHealth-Led Exchanges Eye $4 Billion Market in Health Law EHealth Inc. and an array of online insurance brokers are eying a possible $4 billion-a-year market, after the Obama administration s surprise decision to let them sell government-subsidized coverage under the health overhaul. If the 2010 health-care law survives a Supreme Court review, private brokers can offer the plans starting in 2014, via websites that let consumers compare coverage among a variety of plans the way Expedia users weigh costs and benefits among airlines. That may give the brokers access to as many as 22 million uninsured Americans.

15 Future of Defined Contribution ACA stays More personal policies State Exchanges Private Exchanges Republican Plans More personal policies Tax credits Medicare/Medicaid 2012 will determine a lot

16 What will Romney come up with to replace Obamacare?.The solution in each of these areas is to move away from definedbenefit models and toward defined-contribution systems. Under a reformed approach, the government would make a defined contribution to the health-care security of every American, rather than continue to offer open-ended, well-intentioned, but ultimately empty promises. Jennifer Rubin 3/30/12

17 DC Model for Health Benefits New private health exchanges offer large companies cost control. While state insurance exchanges are mandated by healthcare reform to be up and running by 2014, some private health insurance exchanges that target corporations are already doing business, suggesting that healthcare benefits may follow retirement benefits shift to a defined-contribution model. Susan Kelly April 2, 2012

18 High Level Overview of Defined Contribution with Personal Health Plans Selling individual products in a group setting on a pre-tax basis Marketing to groups that are underserved No small group insurance offered 60% of employers with 50 or fewer employees offer no benefits Defined contribution is good for employers, employees and brokers Future will see greater increase in demand for DC

19 Defined Contribution Platform Employer Fixed dollar contribution EE Contributions Employee Employee Elections Group Products Indemnity plans Dental/Vision Supplemental HRA (105) / PRA (125) Employee Choices Spending Accounts Health Savings Account Flexible Spending Account Individual Products H.S.A. plans Traditional Copay Plans GI plans Employee Education and Decision Support Education on insurance basics and products Personal consultation on which plan is right for employee Plan enrollment and ongoing support H.S.A. savings calculator and education Cafeteria plan explanation and guidance

20 Keys to a Proper DC/PRA Plan with Personal Policies Employees pay premiums out of their own checking account Employer not a part of the decision making process Employer does NOT offer small group insurance

21 Challenges to Implementation TPA expenses have eaten too much of savings One pilot program charged $17/pepm to all EE s Most TPA s now charge much less Online Platforms Zane Benefits Uninsurables New PCIP plan, better state options and a multitude of scheduled benefits plans Complexity Team approach gives you the ability to just focus on what you do best

22 Benefits for the Employer Attract and Retain Good Employees Give a raise to employees at no cost Premium Savings and HSA Contributions for Owners FICA and FUTA Savings on Cafeteria Plans

23 Note FICA savings far exceed TPA costs

24 Benefits for the Employee Affordable Benefit Options More take home pay through tax and/or premium savings 20-40% Avg. savings of $50/month for single, $150/month for family Individually tailored plan to insure financial stability Personal consultation and education on benefits

25 Benefits of DC for the Broker Increase production and reach an untapped market Be on the front end of a nationwide shift in how health insurance is delivered Tremendous cross-selling opportunity Build large, renewable revenue source

26 What is a Private Exchange? Multiple carrier venue for health policies (can include other types of insurance) New technology lets every state, organization, company or producer offer their own branded private health exchange Being driven by Defined Contribution model

27 Customizable Private Exchange Online Shopping Portal

28 Agency Site Includes Employer Page

29 Agency Site Includes Employee DC Explanation Page

30 Call Center Sells the individual products that you cant or don t want to sell. Can turn on or off for each opportunity. Can make outbound calls for fulfillment. % of commission Your CRM Sends you leads on the products you want to sell yourselves. Completely customizable to also generate leads for any product you want to promote You have the ability to customize the buttons as well as the content for the pages after the buttons are selected 100% of commission your appts The Revolution in Employee Benefits

31 Health Insurance Options Experts will help EVERYONE find a plan regardless of their pre-existing conditions or their budget Experts will look for the right plan in 4 different markets 1. Personal health plans all the major carriers, medically underwritten 2. Short Term Medical fewer UW requirements, less expensive 3. Limited benefit plans low cost options, guaranteed issue 4. State and Federal Risk pools must qualify, guaranteed issue Plans they can take with them regardless of their job situation

32 What Brokers Need to Capitalize on DC Basic understanding of: The tax and legal structure The right prospects for now and in the future The sales, communication and implementation process Administration Partner/s Premium Reimbursement (EE $ only) ER contributions Other spending accounts (FSA,HSA etc..) Communication and Fulfillment Technology Fulfillment/product sales

33 Summary The way we purchase health insurance is changing shift toward personal policies not tied to employers Shift will be magnified by legislation regardless of the party in power Brokers/Agents can capitalize on the trend and offer a win/win/win outcome HPA has the training, tools, and technology to give you a turn key solution