The Basics of Self Funded Health Plans for Small Employers Brought to you by: Allied National February 2014 11084s1212 Edition 12.18.12 Topics Covered Today • • • • • • • • • Who is Allied? Why Self Funding Today? Affordable Care Act Impact What is Self Funding? Is Self Funding Right for YOU? What is ERISA? What is Funding Advantage? Underwriting Self Funding Next Steps Allied National Overland Park, Ks. 2nd generation family-owned business Founded 1970 Insurance Administrator Our Allied National Culture Innovation Stability Service 3 Why Would a Small Business Want to be Self Funded? 4 Adverse Impact of Affordable Care Act on Fully Insured Employers Increases Cost 5 What is Self Funding? Fully Insured • Risk bearer is the insurance company • All RISK transfers to insurance company Self Funded • Employer is the risk bearer! • Claims paid from employers claims fund • Employer hires/assigns a claims administrator to pay claims • Employer purchases Stop Loss Insurance 6 Stop Loss Insurance Employer’s risk is minimized Specific Stop Loss • Claims paid by carrier when an individual’s claims exceed a set dollar amount Aggregate Stop Loss • Claims paid by carrier when the group’s total claims exceed a set dollar amount 7 Why Self Funding Long Term – it’s the most cost effective way to finance a group health plan • Eliminates insurance company profit • Eliminates state insurance premium taxes • Allows employer to take control of group benefit plan Money not spent on claims belongs to the employer – not the insurance company Avoids many negative impacts of ACA 8 Sample Small Employer Self Funded Program – 55 lives Self Funded Claim Payment Sample $60,000 Claim $33,000 Employers Specific Stop Loss Paid by Stop Loss Carrier $25,000 Paid from employers claim fund Employers Specific Stop Loss Limit $25,000 Employers Aggregate Stop Loss Employers Claims Fund $2,000 Paid by employee 10 What is Funding Advantage? Self Funding “on training wheels” 5 to 250 lives Self funding made “SIMPLE” Prepackaged plan docs, integrated specific and aggregate stop loss policy • Level monthly payment plan • Terminal liability coverage included • Medically Underwritten • • • • 11 Funding Advantage Simplified Self Funding • Level monthly payments • Protection against large claims or unfavorable claims experience • No hidden fees of ‘pass through’ costs 12 Who is the ideal candidate • • • • • • • Healthy groups Desires lower long-term costs Experiencing adverse premium impact from ACA Desires greater control and flexibility Needs better claims reporting Promotes health and wellness with employees Desires predictable cash flow 13 Self Funded Group Health Plans are subject to “ERISA” regulation. What is ERISA? Employee Retirement Income Security Act 1974 14 ERISA enables self funding ERISA pre-empts the state’s ability to: • Mandate health insurance contract terms and benefits • Impose premium taxes • Impose underwriting constraints and mandated premiums • Directly control pre-existing condition limitation • Limit employee benefit plan options 15 Role of Self Funded Plan Administrator • • • • • • • • Assist with plan design Underwrite Stop Loss contracts Assist with plan communications Provide network access Claims payment Claims management Provider negotiations Reporting and compliance services 16 Allied National’s Unique Underwriting Philosophy TODAY Traditional Underwriting Past history Price based on past health history, experience, industry trends, and industry loads Allied National Underwriting Future costs Price based on future health care costs 17 Allied National’s Unique Underwriting Methodology Traditional Census & Plan Design Industry Trend + Group Experience + Underwriting = Renewal Rate Allied National Underwriting Individual Medical Applications Current Health Condition x Current Health Care Cost = Projected Costs 18 Self Funding Sample Case Study 85 Employees $6.5M Sales - pretax profit 12% Renewal Premium $612,000 Self Funded Program $610,000 Employer’s Loss Fund $366,000 Projected Refund 20% ($73,200) Net Cost $536,800 Refund = 9.3% of profit 19 Next Steps 1. Agent contacts Allied 2. Current census 3. Plan design & benefits 4. Current and renewal billing 20 Process 1. Initial Proposal (Indication) 2. Completed Applications 3. Final Proposal 4. Accept Terms 5. Install Self Funding 21 Thank you! For more information: Allied Sales Support 888-767-7133 www.alliednational.com [email protected] twitter.com/alliednational Fax: 913-945-4396 Allied National, Inc. 4551 W. 107th St. #100 Overland Park, KS 66207 This is an invitation to inquire about the Allied Funding Advantage plan. This is a limited description of the plans. See plan brochure and plan documents for complete details.