Performance Health Overview 1
State of the Group Health Market Diminishing Competition PPACA Consequences, Carrier-Direct Future Obstacles to Accessing Care Medical Loss Ratio Realities 2
PPACA: Upward Pressure on Insurance Premiums Compounding Cost-shifting from Public to Private sector 10 / 65 /10 Rule Increased poverty levels = increased Medicaid enrollment Results in a greater cost shift to a declining base Currently, the combination of Medicare, Medicaid and Uninsured represent 65-75% of the total Paid Claims. The projected minimum increase of the total Medicare beneficiaries during the next 10 years is 20%. Medical Loss Ratio No motive to win business through competitive pricing Shifting profit centers away from Underwriting Profit to Retention, Prescription, Wellness, Disease Management, etc. 3
Decreasing Access to Care Shrinking PCP population coupled with increased insured patient base Higher operating costs and lower average reimbursements accelerating provider early retirement Less Physician interaction more Mid Level Community-level facilities closing or being acquired Increased health system patient steerage 4
Diminishing Carrier Competition Nationally, 3 Left Standing: 25 years ago, 60+ insurers and 15-20 per market 10 years ago, 5-8 insurers in most markets Today, effectively 3 Traditional Carriers Nationally Few, Regionals Remain Continued Capital Requirements will further erode Regionals 5 Provider Owned Plans have done nothing to lower costs
Downward Pressure on Broker/Carrier Relationship Carriers want to go Direct: Brokers drive prices down through competition Commissions, overrides, education and entertaining ACA provided the vehicle for a historical desire Carrier Driven features: Plan design Funding configuration Administration / service support Resources 6
Medical Loss Ratio (MLR): Unintended Consequences 80-85% Carrier MLR Requirements carrier retains pooled deficits and refunds surpluses Result is forced conservative underwriting positioning Theoretically, carrier profit should be contained within the 15-20% retention Carriers lack motivation to control costs as retention proportionality rises with claims costs 7 Obama Administration compromise allowed for profiting on Rx, Medical Mgmt, Network, Wellness, etc.
8 Employers have to save themselves
A New Direction with Reconfigured Approach Alternate-funded plans provide the foundation for employers to reassert their control Insurance carriers are reacting quickly by providing small group self-funded options but those products are designed with many of the same features that only benefit the Carrier. Common characteristics: may require multi-year contracts, immature reinsurance contacts, insurance carrier off-the-shelf plan designs, insurance carrier profitcentered resources, carrier based customer service, etc. 9
Perception is not always Reality Local Employers will see Blue Cross, Aetna and United Healthcare as larger than our reinsurance partner, Underwriting Management Experts (eg UME) Other Brokers would feel the same about competing products with other Reinsurers, such as Companion, HCC, HM Life or certain Trust Products Reality is that UME is larger in the Level Funded space than all of those other entities. UME s Level Funded solutions represent over $300 million health plans expenses and over $130 million in reinsurance premiums alone 10 No Johnny Come Lately, the leadership of UME began pioneering the Level Funded concept 20 years ago
Why Choose Max Advantage or Max Funded? Alternate-funded plan with: Flexibility of partially self-funding Cost stability of Fully Insured Employer pays a fixed monthly amount ( Level Funded ) that is used to fund fixed administrative costs, stop-loss premium and claims. Written on a 12/18, 12/21 or 12/24 contract using A+ rated insurance carriers. 11 With Performance Health, the Employer retains 100% of excess claims fund (difference between aggregate attachment point and actual paid claims).
Benefits of Alternate Funding The Max Advantage and Max Funded solution allows an easy, worry-free transition to alternate-funding. Flexible & Customizable Reduces PPACA taxes and State premium taxes A+ Rated Insurance Carriers: Gerber & US Fire Fixed Monthly Payments Maximum Costs Defined Lower Administrative Costs Cash Refund Potential Online Claims & Service Portal 12 Access to Claims Data
Feel Like You re Fully Insured! Make fixed monthly payments, based on maximum annual liability, into a claims fund established in your name. Payments for administration of the plan and any claims expenses are made from the claims fund. Any surplus remains in the fund. Any shortfall is covered by the stop-loss carrier. Keep 100% of surpluses from unused funds after the end of the contract period. 13
How Performance Health Alternate Funding Works The monthly payment is split: Fully Insured Monthly Max Funding Part is used to pay the fixed costs Admin/Service fees Stop loss insurance premiums Part is used to fund expected claims Up to the employer s monthly Max 100% Non-Refundable Premium Potential Savings Actual Claims Stop Loss Premiums Bucket C Bucket B Stop-loss protects the plan from any one excess claim over the individual limit Administration Expenses Bucket A Unused claim funds are returned to the employer 14 A. Unused claim funds are retained by employer B. The cost of a Monthly Max Funding plan is the sum of the following: 1. Actual claims paid during the contract year 2. Stop loss premiums 3. Administrative expenses
How Performance Health Alternate Funding Works Claim Funding Example Monthly Cap Funding The claim funding limit for the first two months of the contract year is $80,000* Potential Savings If claims paid total $90,000, then the stop loss carrier will fund $10,000 Actual Claims Bucket C *Amount due varies with plan enrollment by month. 15 Stop Loss Premiums Administration Expenses Bucket B Bucket A
How Performance Health Alternate Funding Works Claim Funding Example Monthly Max Funding 16 If the claim funding limit for the first three months is $120,000*, and if paid claims total $110,000, then $10,000 will be held by the stop loss carrier for future claims *Amount due varies with plan enrollment by month. Potential Savings Actual Claims Stop Loss Premiums Administration Expenses Bucket C Bucket B Bucket A
How Performance Health Alternate Funding Works Claim Funding Example Monthly Max Funding 17 The employer s annual claims funding limit is $480,000. If claims paid are less than $480,000, then the employer will receive any unused balance. If claims exceeded the $480,000, the stop loss insurer pays all claims over this amount. Potential Savings Actual Claims Stop Loss Premiums Administration Expenses Bucket C Bucket B Bucket A
Summary 18 Flexible plan designs and ability to create your own unique plan Reduction in PPACA and state premium taxes Avoid state mandates Ability to medically underwrite risk Choose best in class service providers
19 Administrative Solutions
The Performance Health Model A Client Driven Model Independent and Mature reinsurance contracts Transparent and Component based fixed fee pricing Prescription Drug pricing based on acquisition costs no spread revenue Custom plan designs Impactful Health and Wellness management services Dedicated and Accessible client service team 20
We Get What You Need One Partner, Multiple Benefits Benefit administration PPO networks Narrow Networks Care management Population management PBM Telemedicine Quality & Cost Transparency Tools Reinsurance solutions Flexible Design Build and customize plans and networks to steer: Physician group network usage Services to network partners High Quality & Low Cost Providers Lowest Net Cost Rx 21
We Get What You Need Cost Containment Capitated based fees Proprietary PPO networks, nationwide network partnerships, non-network negotiations Incentives with achievement based rewards Agile Response to Trends Risk management eliminating exposure to claims outside the contract Data Management Fully-integrated data warehouse Reporting with valuedriven, actionable information Recommendations from experts with over 20 years experience 22
Thank you for your time! questions or comments? 23