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2016 HR FLORIDA
CONFERENCE & EXPO
www.hrflorida.org
2016 HR FLORIDA CONFERENCE & EXPO
Sustainability in Your
Benefits Program
August 30, 2016
Catherine Ratcliffe
Chief Operating Officer
www.hrflorida.org
2016 HR FLORIDA
CONFERENCE & EXPO
www.hrflorida.org
LEARNING OBJECTIVES:
 Identify where to look to see if program is on a
sustainable track
 Determine potential costs related solutions that could be
beneficial to the company based on its plan utilization
and trends
 Recognize cost drivers
2016 HR FLORIDA
CONFERENCE & EXPO
www.hrflorida.org
BENEFITS PLAN SUSTAINABILITY

Manages employer costs and helps protect against surprises when it is
time to renew

Keeping a close eye on the impact of change and growth

Achieved by learning where to look to make sure your plan is meeting
both the needs of the employer and employees

Identifying the key elements and cost drivers in
your benefits plan on an annual basis is paramount
2016 HR FLORIDA
CONFERENCE & EXPO
www.hrflorida.org
CREDIBILITY & EXPERIENCE RATING

Medical – 100% Credibility 500 employees on the plan for 12 months

Dental – 300 employees with 12 mature months

Vision – Almost immediate

Life – 20,000-22,000 employees

STD – 400 employees

LTD – 18,000 employees

Supplemental  not credible, all manually rated. State reviews to see
block loss ratios and will either refund premiums or increase coverage if
loss ratio is too low
2016 HR FLORIDA
CONFERENCE & EXPO
www.hrflorida.org
PRICING OF GROUP HEALTH INSURANCE
2016 HR FLORIDA
CONFERENCE & EXPO
www.hrflorida.org
TREND

Trend is the inflammatory rate applied to current claims
to project the future costs of the plan

Medical  11-12

Pharmacy  12-13

Dental  8-10

Disability  COLA option standardly 3%
2016 HR FLORIDA
CONFERENCE & EXPO
www.hrflorida.org
FUNDING OPTIONS
A. Fully-insured
B. Partial self-insured
C. Self-insured (advice to pay on ancillary)
D. Participating
* Medical is typically the only coverage that offers A, B, & D
* Dental, Vision and Disability are generally either A or C
2016 HR FLORIDA
CONFERENCE & EXPO
www.hrflorida.org
SELF-FUNDED
 Employer assumes all or a portion of the risk for health
benefits
 Administrative options offered to employers choosing
self-funding:
 Administrative Services Only (ASO)
 Third Party Administration (TPA)
2016 HR FLORIDA
CONFERENCE & EXPO
www.hrflorida.org
HOW DOES IT BREAK DOWN?
MEDICAL

Administration
Fees

Stop-loss

Claims
DENTAL, VISION
AND DISABILITY
 Administration Fees
 Can include taxes
 FICA rate: 8%
 Cost to admin: 3%
 Claims
2016 HR FLORIDA
CONFERENCE & EXPO
www.hrflorida.org
SELF-FUNDED TERMS
Administrative Fee:
 Fee charged for claims adjudication, billing, eligibility, customer service,
plan document maintenance, access fees, managed care fees
Includes:
Fee for Broker
Disease Management
Processing Claims
Nurse Line
Network Fee
Maternity
COBRA
Additional Services
2016 HR FLORIDA
CONFERENCE & EXPO
www.hrflorida.org
SELF-FUNDED TERMS
Expected Claim:
 Total claims underwriter expects to have in one
policy year, actuarially determined from historical
claims experience
 Projected claims blended in manual rates
 DOES NOT INCLUDE CORRIDOR
Mature Claims:
 Mature claims account for the lag between billed
services and payed services
2016 HR FLORIDA
CONFERENCE & EXPO
www.hrflorida.org
SAMPLE LAG REPORT
2016 HR FLORIDA
CONFERENCE & EXPO
www.hrflorida.org
SELF-FUNDING: ADVANTAGES
Flexibility in Plan Design
 Must follow ERISA
 Self-funded plan not bound by state mandates
 Example for FL: Dependent age limit; DOMA
 Can create any level of benefits
 Adjust PDL
 Cost Plus options
Risk Management Effectiveness through Stop-Loss Insurance
 Employer buys level of insurance Stop-Loss
 Can change networks and PBM’s based on performance
 Protection from monthly fluctuations can be controlled through a Monthly Aggregate
accommodation
 Lower fees: Transition reinsurance fee is paid based on % of premiums
 This would mean Stop-Loss only
2016 HR FLORIDA
CONFERENCE & EXPO
www.hrflorida.org
SELF-FUNDING: ADVANTAGES
Tax Savings
 No premium tax for the self-funded claim fund (Average state tax is 2 percent)
Retention
 Administration of the plan less costly under a self-funded arrangement without
sacrificing a reduction in services
 Also the option of choosing services à la carte
 i.e. Disease Management, Nurse line, etc.
 FICA administration on disability
 Reserves- Disability is for the life of the claim
Additional Cash Flow
 Employer holds onto reserves
2016 HR FLORIDA
CONFERENCE & EXPO
www.hrflorida.org
SELF-FUNDING: DISADVANTAGES
Can Be More Work
 Review claims
 Run in + Run out
 Manage account
Asset Exposure
 Employer’s assets are exposed to any liability created by
legal action against the self-funded plan
Fiduciary Responsibility
 Employer is accountable
Dental & Disability
 Generally, no stop-loss options available
2016 HR FLORIDA
CONFERENCE & EXPO
www.hrflorida.org
SELF-FUNDED TERMS
Reinsurance:
 Coverage for catastrophic or excessive claims
 Two kinds: Specific & Aggregate

Purchased to protect employer when eligible claims
during the policy year on any one individual exceed
the specific liability limit

When this does occur, you are reimbursed by the
insurance company

May have advanced funding on
accommodation
2016 HR FLORIDA
CONFERENCE & EXPO
www.hrflorida.org
SELF-FUNDED TERMS
Maximum:
 Selected CORRIDOR could be 110,120,125 etc.
 Claims that exceed this level are reimbursed by
Stop-Loss carrier
 125% = Aggregate Attachment Factor; percentage
can vary, but 125% is most common
 Watch out for minimum attachment levels if you have
extreme enrollment fluctuations
2016 HR FLORIDA
CONFERENCE & EXPO
www.hrflorida.org
12/15 SELF-FUNDED CONTRACT ILLUSTRATION
Jan. 2015
Jan. 2016
Mar. 2016
Jan. 2017
Mar. 2017
12 months
Self-Funded Contracts
Incurred Claims
15 months
Self-Funded Contract Paid Claims
12 months
Next Contract Year
Incurred Claims
15 months
Next Contract Year Paid Claims
Self-funded covers claims incurred in 12 months paid in 12/12 or 12/15 paid in 15 months
Jan. 2018
2016 HR FLORIDA
CONFERENCE & EXPO
www.hrflorida.org
FULLY INSURED CONTRACT ILLUSTRATION
Jan. 2015
Jan. 2016
Jan. 2017
12 months
Fully-Insured Contracts
Incurred Claims
24 months
Fully-Insured Contract Paid Claims
12 months
Next Contract Year
Incurred Claims
24 months
Next Contract Year Incurred Claims
Fully insured covers claims incurred in 12 months paid in 24 months 12/24
Jan. 2018
2016 HR FLORIDA
CONFERENCE & EXPO
www.hrflorida.org
STOP-LOSS INSURANCE

Rx?

Subrogation fees?

Non-network fees?

Out of country?

Is the contract a mirrored contract?
2016 HR FLORIDA
CONFERENCE & EXPO
www.hrflorida.org
PROTECTION AGAINST UNEXPECTED CLAIMS
What can a self-funding employer do to protect assets against such losses?
 Stop-Loss Insurance offers protection against excessive claims by reducing the risk
on any individual insured
 Evaluating potential large claimants
 Don’t set individual Stop-loss based on size of group
 Specific Stop-Loss limits the amount of liability that the employer has for each large
claimant. The lower the Stop-Loss level, the more insurance the employee has
 Also look at aggregating specific contracts
 Adds a bucket for insurance
2016 HR FLORIDA
CONFERENCE & EXPO
www.hrflorida.org
PROTECTION AGAINST UNEXPECTED CLAIMS
Aggregate Stop Loss: The Ultimate Protection
 The expected claims of any given group can usually be predicted with a fair
amount of accuracy and thus can be budgeted
 But, when these expected claims are incurred by a surprisingly high number of
insureds, an unforeseeable fluctuation occurs
 For example:
2 breast cancers
2 heart claims
1 knee replacement
1 lumbar pain
1 end stage renal
13 babies
1 breast cancer
2016 HR FLORIDA
CONFERENCE & EXPO
www.hrflorida.org
PROTECTION AGAINST UNEXPECTED CLAIMS
The Ultimate Protection



The impact of any unpredictable variation could
endanger the financial stability of a company
Aggregate Stop-Loss Insurance is a precautionary
measure intended to defend from the unknown,
shielding your assets and preserving cash flow
Large companies that have credible claims
experience often go without aggregate protection
2016 HR FLORIDA
CONFERENCE & EXPO
www.hrflorida.org
INDIVIDUAL & AGGREGATE STOP-LOSS
Example of how a $142,000 Intervertebral Disc Disorder claim would be handled
with a 50K Spec:
Claim comes in
to TPA
TPA splits and pays 50K
spec. funding request
to reinsurance
company for $92,641
$92,641 gets
funded to
employer and
paid to provider
simultaneously
2016 HR FLORIDA
CONFERENCE & EXPO
www.hrflorida.org
Questions