Chet Rhoads The HDH Group November 19, 2014 83% of firms with 25-49 employees offer health insurance 91% of firms with 50-199 employees offer health insurance 98% of firms with 200-999 employees offer health insurance 100% of firms with 1,000 employees or more offer health insurance Most important Asset comes with a price Best talent in Labor Pool ◦ ◦ ◦ ◦ Innovation Competitive Advantage Compete with Global Markets Relationship Pipeline Competitive Wages are Comprised by unsustainable healthcare costs ◦ Competitors that can control healthcare cost will have the advantage of attaining/retaining best talent Will not sustain healthcare costs over time Typically transfers more of the burden on employee Carriers and legislation can impose limits Engagement of employee workforce limited Higher deductibles, versus higher employee contributions Implement coinsurance for in-network services Higher ER co-pays Health Reimbursement Account (HRA)/Health Savings Account (HSA) Spousal Mandate/Surcharge (Working Spouse Provision) Prescription Drug Programs ◦ Mandatory Generic ◦ Mail Order ◦ Formulary Sustain healthcare costs over time Encourage employees/dependents to make better healthcare decisions Encourage employees/dependents to conduct better behavioral lifestyles More latitude with carriers and legislation Over time, a culture is created for invested and engaged workforce Alternative Funding Arrangements ◦ Self-Funding – Cost Plus, Administrative Services Only (ASO) ◦ Captive Prescription Drug Carve-Outs Defined Contribution/Private Exchange Model Wellness Data Integrity Remit monthly premium to insurance carrier Carrier in turn will pay: ◦ Claims ◦ Administration ◦ Reinsurance ◦ Pros Predictable budget Less volatile compared to self-funding Carrier pays PPACA fees on client’s behalf Client not responsible for run-out claims ◦ Cons Carrier uses past claims experience to determine future rates Premium payments do not reflect real-time claims changes Carrier sets the pooling level ($125K) Administration built into the rates is higher than a selffunded arrangement 2-3% annual fee on health insurance providers only applies to fully-insured plans (2014) Premium taxes A trade off of short term stability for long term cost savings Assume more risk/opportunity for more reward Pay carrier a monthly or weekly administrative fee for claims adjudication, billing, eligibility, customer service, etc… Purchase Stop Loss Insurance ◦ Specific: Protects client when claims incurred during policy year on any one member exceed specific liability ◦ Aggregate: Protects client when claims incurred during policy period exceed a certain corridor above expected claims Pay actual claims less stop loss reimbursements monthly Reserves – Held by Carrier or Client Settlement – Annually if carrier hold reserves ◦ Pros Good years; ABC Company experiences immediate savings ABC Company chooses the amount of risk to retain via the specific deductible Carrier does not profit as a result of good claims ABC Company holds onto excess reserves instead of paying them to a carrier Avoid 2-3% fee on health insurance providers (2014) and premium taxes Administration of the plan less expensive Carrier renewal rates irrelevant (used for COBRA and budgeting) ◦ Cons Bad years; possibility of spending more than fully-insured rates More volatile compared to fully-insured (volatility a function of stop loss specific deductible) Client responsible for run-out claims in the event of a carrier change/termination of plan/layoffs Carriers do not remit PPACA fees on client’s behalf – Employer pays fees annually based on members Captive ◦ A member-owned insurance company ◦ Initial captive structures were created for the Fortune 500 (e.g. Exxon, IBM, Xerox) Group Captive ◦ Provided the advantages of a captive to small and mid-market employers ◦ Over 50% of mid-sized employers are in an alternative risk program Medical Group Captive Self Funded Fully Insured Yes No No May hold til yr. end Yes N/A Yes, but limited Yes N/A Yes Yes No 3 2 1 (carrier) Yes - in Captive level No No Yes - at level 3 Yes - at level 2 Yes No Yes Yes Yes - Letter of Credit Reserves - possibly waived No Yes Yes No Yes - but lose any claim to refund Yes - but responsible for runout Yes Yes Yes Yes Yes - limited Yes Yes Biometric screening/HRA required Yes No No Requires Wellness for all members Yes No No Flexibility/negotiation on fixed costs No Possibly Possibly Yes - every renewal Yes - first year/not at renewals No Medical Underwriting/could be declined Timely reimbursements Group selects Stop Loss Spec Level Good Cash Flow needed Risk Levels Risk Sharing Liability capped Flexibility on renewal date Up front cost Should be considered for long term Able to terminate arrangement Flexibility on plan design Flexibility on Carrier Claim lasering possible Plan sponsor chooses a Pharmacy Benefit Manager (PBM) to administer and manage prescription drug benefits separate from the PBM contracted with the health plan Plan sponsor ends up paying less in administrative fee by contracting directly with a PBM on a carveout basis Plan sponsors are able to remove fees that bear no relationship to the performance of their plan or the cost of providing a pharmacy benefit ◦ ◦ ◦ ◦ Negotiating contract terms and conditions Audit rights Clinical management Risk management programs Allows for aggressive price negotiations ◦ Governs pricing, discounts and rebates Allows for carve-out specialty Prescription Drugs Customized Clinical Programs Medical Program must be self-funded to have ability to carve Prescription Drug Program out Caution! – It is important that data feeds between PBM and medical carrier/administrator take place for integration of pharmacy benefit claims and medical claims Private Exchange Model Video Employer Defines their Contribution (flexible choices to fit your management philosophy and budget). Offers employees multiple benefits choices. Employees value choice and the ability to create a benefit plan that fits their needs. New Model: Employees get to select the benefits that make sense for their lives Chris & Family Previously $1,000 Now is $750 Defined Contribution Helps Create Engaged Employees by: • Providing choice • Providing decision making tools • Creating a purchasing venue that is easy for the employee to evaluate the options and enroll in plans that make sense for them Participatory Activities Only (Health Contingent) Outcomes Based (Health Contingent) Tobacco Program Primary Feature Employees are asked to participate in an event such as a biometric screening or Health Risk Assessment. Generally verifiable information is used. Employees are asked to obtain a certain health outcome within the normal range to obtain an incentive or avoid a surcharge. Example: an employee who scores outside the normal range for BMI will not obtain the reward or avoid the surcharge. Generally VERIFIABLE information is used. Typical Employer Objective Entry Level-Educate employees about their personal health Does not apply Employees are asked to participate in an activity related to a health factor. Example: an employee who scores outside the normal range for BMI may be asked to participate in a walking program to obtain a reward or avoid a surcharge. Generally SELF-REPORTED information is used Provide employees with various activities to support good health Applies Tobacco has it's own unique incentive/ surcharge amount as well as the requirement that tobacco users do not need to quit using tobacco. They need only to participate in a tobacco cessation program to qualify for an incentive or avoid a surcharge. There is not limit to the number of times a tobacco user may go through a cessation program and still qualify for the reward. Reduce or eliminate tobacco usage Based on participating in an activity related to a health factor 30% of the individual monthly premium Based on reaching goals related to a health outcome or factor 30% of the individual monthly premium Meet the 5 Wellness Requirements * for Health Contingent Programs Application of Incentives/Surcharges Maximum Incentive/ Surcharge eff. 1-1-14 Reasonable Alternative Standards (RAS) Based on participating in an event No limit Manage risk/Reduce claims & improve productivity/Accountability Applies Not required to provide RAS RAS can be another less RAS can be an activity or an easier strenuous activity. MD to achieve health standard. MD verification permitted to prove verification of health health condition conditions not permitted Incentives will be treated as if they were not earned(effectively having no impact on the 9.5% calculation) while surcharges will be treated as if they apply to all employees (effectively reducing the 9.5% by the maximum possible surcharge available to any employee) Impact of Incentives/ Surcharges on the 9.5% Affordability Test in 2015 (Final rules have not been released) *Frequency, Size of Reward, Reasonable Design, Uniform Availability/RAS, Notice of RAS Powered by: Applies Based on participation in a tobacco cessation program or actually quitting 50% of the individual monthly premium, whether stand-alone or integrated with other surcharges RAS MUST be a tobacco cessation type of program A tobacco surcharge will be treated as if no employee qualified for the surcharge (effectively having no impact on the 9.5% calculation) Delivering available, complete, accurate data on time Transforming information into actionable knowledge that empowers the continuum of patient care ◦ Significantly enhances patient and population health ◦ Control cost Creates venue to: ◦ Optimize care ◦ Improve outcomes ◦ Control Costs Trust & Secure – Cleansing, Archiving, Safeguarding, and Controlling Data Visibility – Online financial and clinical dashboards, population health trends and analysis Insight – Data driven underwriting analysis, benchmarking and modeling for plan design Optimize – Financial Risk Pools driven by predictive analytics Thank you for your attention. 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