strategies for controlling medical insurance costs
Post on 29-May-2015
326 Views
Preview:
DESCRIPTION
TRANSCRIPT
Strategies for Controlling Medical Insurance Costs
How to stop the annual rate increase of 15% for medical insurance coverage.
Traditional vs. CaptiveParticipants
1
Moderator:Michael A. Schroeder – President, Roundstone Management, Ltd.
Panelists:David Reynolds – President, Chief Executive Officer,
Capitol Administrators
Bernie Tillotson ‐ Managing Director, Employee Benefits Division, Andreini & Company
Traditional vs. CaptiveProgram Outline
• Stabilize escalating premiums with greater control over the delivery of insurance
• Standard Stop Loss coverage issued by an A rated insurer along with Captive participation
• Premium savings through investment and underwriting return
• Medical Stop Loss Advantage Program requirements
2
Traditional vs. CaptiveThe Standard Market
3
The Standard Market = Minimal Control, No Transparency
• Unanticipated rate increases
• Burdensome plan marketing
• Available responses– Change carrier– Change benefit levels– Change contribution schedule
Today’s annual cost increases will double premium in 6 years
Captive DefinitionsAverage Annual Premiums
4
13,375
12,680
12,106
11,480
10,880
9,950
9,068
8,003
7,061
6,438
5,791
4,824
4,704
4,479
4,242
4,024
3,695
3,383
3,083
2,689
2,471
2,196
‐ 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
Average Annual Premiums for Single and Family Coverage, 1999‐2009
Single
Family
Source: Kaiser/HRET Survey of Employer – Sponsored Health Benefits, 1999 – 2009.
Traditional vs. CaptiveLarger Employers – Self Fund
Percentage of Covered Workersin Partially or Completely Self‐Funded Plans, by Firm Size, 1999‐2000
5Source: Kaiser/HRET Survey of Employer – Sponsored Health Benefits, 1999 – 2009.
Traditional vs. CaptiveWhy Large Employers Self Fund
• Control over benefit plan and claims administration
• Complete data and cost transparency
• National plan consistency, no state mandates
• Cash flow benefits (“pay as you go”)
• Custom designed best in class wellness/behavioral programs
6
Traditional vs. CaptiveWhy Don’t Mid‐Size Employers
Self Fund?
7
Volatility – employers’ costs can vary significantly due to large claims or an aggregation of smaller claims
Turnkey Program – Running a self insurance programcan be intimidating. Plan design, TPA/Network selection,stop loss contract negotiations
Traditional vs. CaptiveOpportunity
Stop Loss Group Captive
Capture underwriting and investment incomeby combining Best in Class Companies into amedical benefit group captive.
8
Captive Definitions
CaptiveAn insurance company that provides insurance to and is controlled by its owners.
Group CaptiveA group captive is an insurance facility formed by companies joining together to share risk. Each have a desire to controltheir own risk. Member companies maintain good loss histories and effective risk management programs.
Captive Definitions
9
Traditional vs. Captive
Traditional Program Captive Stop Loss Program
Cycle driven Smoothes Cycles and Cash Flow
Transaction driven Relationship driven with Transparent Communication
No alignment of interests Skin in the Game for all Participants
Generic services Specialized Services
No Return on Investment Retain U/W Profit and Investment Income
The Captive Difference
10
Program Design
• All participants committed with a capital investment (collateral) in the form of cash
• Participants’ exposure is limited to premium and collateral
• Participants take ownership in growth and economic success
Program Design
11
Reinsurance
Stop Loss Reimbursements
Claims Payments
Stop LossPremiums
U/W Profit and Investment Returns
B CA D E
Group Captive Facility
Claimants
Stop Loss Reimbursements
Captive Participants
Collateral
B CA D E
Traditional vs. Captive Market
Policy Issuing Carrier
12
Reinsurance Structure
13
Group Aggregate for Captive
Aggregate available for Participant’sDeductible exposure
Risk SharingThe Hierarchy of Loss Application
1. Loss Fund of each Participant
2. Then, the Indemnity Collateral of each Participant
3. Then, the Loss Fund of all Participants proportional with their Assumed Premiums
4. Then, the Indemnity Collateral of all Participants’ proportional with their Assumed Premiums.
5. Aggregate Reinsurer
Participant Loss Fund
Participant Indemnity Collateral
Proportional Share of All Participants’ Loss Fund
Proportional Share of All Participants’ Indemnity Collateral
2
3
1
4
Heterogeneous Risk Sharing
5
Aggregate Reinsurer
14
Risk Sharing
The Hierarchy of Loss Application
1. Losses shared Pro Rata of each Participants Assumed Premiums
2. Then, the Pro Rata Indemnity Collateral of all Participants’ proportional with their Assumed Premiums.
3. Aggregate Reinsurer
*Individual employer aggregates can be reinsured via the Group Captive layer
Association Risk Sharing
15
Proportional Share of All Participants’ Loss Fund
2
3
1
Proportional Share of All Participants’ Collateral
Aggregate Reinsurer
Group CaptiveStart Up Considerations
16
• TPA/Network Selection
• Deductible Levels
• Employer Aggregate Issues
• Wellness/Behavioral Programs
Group Captive
Reduce operating costs over time with the best overall price
Realize underwriting profits and investment income
Stabilize an unpredictable and cyclical marketplace
Control claims, coverage, loss control, frictional costs
Group Captive Benefits
17
Underwriting Guidelines• 50+ employee Groups• Minimum of $20,000 Deductible• Support culture of health and wellness
Submission Requirements• Completed Application or RFP outlining criteria• Current Detailed Census• 3 Years Stop Loss Premium and Detailed Claims History• Copy of Current Policy• Copy of the Current Plan, Proposed Plan(s) and
accompanying documents• Identity of the current and/or proposed TPA
Underwriting Guidelines &Submission Requirements
18
Contact
826 Westpoint Parkway, Ste. 1250Westlake, Ohio 44116
703.966.9797/c202.362.2154/p
440.617.0333x234/p202.478.1858/f
dmccully@roundstoneinsurance.com
www.roundstoneinsurance.com
Contact
19
top related