how to lower healthcare costs in the face of healthcare reform uncertainty

How to Lower Healthcare Costs in the Face of Healthcare Reform Uncertainty

FEATURING PROFESSIONAL BENEFIT ADMINISTRATORS, INC.

July 27, 2017

Agenda

What We’ll Cover in Today’s Discussion

• Introductions

• What it means to be fully insured or self-funded

• How self-funding with a TPA is helping many companies deal with rising

healthcare costs (including broker fees/commissions)

• How you can control healthcare costs and put more control in the hands

of your members (even if you are already self-funded with an insurance

carrier)

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About the Speakers

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Webinar Host

Michelle Lanter Smith

Chief Marketing Officer

EPAY Systems

[email protected]

Featured Speaker

Ron Walter

Chief Executive Officer

Professional Benefit Administrators

[email protected]

mailto:[email protected]


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Legal Disclaimer

The contents of this presentation should not be construed as legal advice or a

legal opinion on any specific facts or circumstances.

These materials are intended for general information purposes only, and you are

urged to consult a lawyer concerning your own situation and any specific legal

questions you may have.


What’s the problem with group healthcare?


• The cost of health care has risen 38.3% over the last 5 years (2017 Price

Waterhouse survey)

• During this period, most companies have had pressure to hold the line on

prices or to lower them

• For most companies, cost of medical plan is 2nd or 3rd largest annual

expense

• With the uncertainty of health care reform ─ or the reform of the reform ─

what should we do?


The Current State…

Poll: How much have your health insurance costs gone up in the last year?WWW.EPAYSYSTEMS.COM 8

Let’s talk about the options…


Fully Insured vs. Self-Funded

FULLY INSURED

• Insurer accepts full risk

• Insurer determines reserve levels

• Insurer manages reserve capital

• Insurer retains excess reserve/capital at year’s end

• Insurer manages and oversees all services vendors

• You pay fixed premium monthly that increases at every renewal

SELF-FUNDED

• Employer accepts some risk

• Employer determines reserve levels

• Employer manages reserve capital

• Employer retains excess reserves

• Employer or TPA manages service vendors (more control over type/quality/cost of care by service vendors)


Self-Funded Options

SELF-FUNDED WITH ASO

• ASO arrangement with a carrier:

the carrier’s version of self funding

• ASO stands for Administration

Services Only

SELF-FUNDED WITH TPA

• Third Party Administrator – independent administrator

that works for the employer

• Total Plan Administration – provides all admin services

in addition to cost of claims management, claim edits

for improper billings, customer service, plan design

options, total transparency of cost.

• Transparency – disclosure of all costs - administration,

stop-loss, network access fees, commissions, claim,

discounts, subrogation savings, proper claims

administration savings, eligibility management savings.


How can you lower your healthcare costs?


• Get a way to offer meaningful

benefits in a highly-regulated

environment

• Get a way to put more financial

control in the hands of your members

Self-funding may be the answer!

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Why do more than two-thirds of all employers

choose self-funding over traditional insurance?

• The freedom to customize their health plan

• Addressing company objectives and employee

needs

• Gaining the potential for savings

• And finding ways to reduce future claim costs



How does a self-funded health plan work?


Rather than funding your plan

with non-refundable

premiums, a self-funded plan

treats claims as expenses.

What are the Benefits?


• If claims are at or below anticipated levels, you immediately realize savings

• You avoid - reserves, contingency margins, insurance company profit,

advertising costs and most premium taxes

• ERISA governs all plans; self-funded plans can avoid state requirements

• You can avoid – many state and ACA-mandated coverages

• Transparency – you finally know what you are paying for in plan

administration, insurance, commission, claims

The total of administrative costs,

stop loss premiums and potential

claim costs are typically no

greater than the premiums paid

to an insurance company.


Stop Loss Insurance Limits Your Liability

(Your Financial Umbrella)

• Specific stop loss covers excess

individual catastrophic claims

• Aggregate stop loss covers excess

claims for the entire covered group


In a fully insured plan,

premiums are held and

invested by the carrier.


In a Self-Funded Plan…

• You pay the fixed costs monthly

• The actual claim costs are paid weekly as

they come due

• You hold and invest the reserves

AND

• Service issues are usually less and easier

to resolve


The maximum cost of a fully insured

plan is the total of all premiums

paid.

Fully Insured vs.

Self-Funding


In a self-funded plan, the cost equals the

sum of…

• Administrative expenses

• Stop loss premiums

• Claims charged prior to any stop loss reimbursements

• In addition, there is always a maximum claims cap

Fully Insured vs. Self-

Funding


In contrast to a fully

insured plan, a savings

will result if claims are at

or below the maximum

cost, in addition to lower

fixed costs.

Case

Example:

Company

with 203

Employees

100%

Non-Refundable

Premium

$2,267,186

Fully

Insured

Partial Self-

Funding

Administration

$112,783

Stop Loss

Premiums

$464,866

Actual Claims

$1,198,548

Actual Savings

$490,989


In this case, an insurance company

would have retained $1,068,638.

$112,783

$464,866

$490,989 Your Profit

$1,068,638

Partial Self-

Funding

Administration

$112,783

Stop Loss

Premiums

$464,866

Actual Claims

$1,198,548


If the plan were self-funded, the

employer would pay $577,649 for fixed

expenses and fund the monthly claims

totaling $1,198,548 for the year.

Partial Self-

FundingAdministration

$112,783

Stop Loss

Premiums

$464,866

Actual Claims

$1,198,548


Your Savings Belongs to You

With a self-funded

plan, you would

keep the $490,989.


Reserves Remain With Your Plan

A reserve is needed to cover

claims presented for payment next

year. However, a significant reserve

has been established with these

savings, with plenty left over.


Another Benefit of

Self-Funding:

Access to valuable data on

plan utilization and claims.


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An Independent TPA will

Use Relevant

Information…

…to identify cost drivers and manage costs.

…help those with chronic health conditions

receive the on-going care they need.


Over time, self-funded

plans can help promote a

culture of wellness that

benefits members.


Once a self-funded plan is

in place, you will notice

little difference in the way

it operates.


Moving from an insurance

carrier’s ASO program can…

• Lower your costs even more

• Gain more flexibility

• Gain greater transparency

• Avoid state required benefits


What exactly does a third party administrator do?


A third party administrator

handles your administrative

needs including:


• Enrollment & eligibility

• Claims administration

• PPO & PBM contracting

• Management reporting

Regulatory Compliance

A TPA will keep your plan in compliance

with ERISA, HIPAA and ACA Restrictions

and all associated reporting

requirements.


How self-funding may be

beneficial for your

company…

• Increased financial control

• Happier employees

• A healthier bottom line


How do you begin with a self-funded plan with third party administration?


• Review your current plan and prior claims

experience

• Determine the amount of risk your company

wishes to manage

• Determine an appropriate level of stop-loss

insurance to cover excess claims and limit

your risk

• Review the results and potential savings


Integrated HCM to Help You Manage Your Employees and Benefit Programs


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