Take Control & Reduce Health Care Spend

1© 2013 Ask, Share, Learn

www.proformative.com

#CFOD13

Take Control and Reduce Health Care SpendPresented by: Laura M. Smith



#CFOD13

Agenda

Challenges

What is Self-Funding

Benefits of Self-Funding

Risks with Self-Funding

Am I a good candidate for Self-Funding?

Partnering with the right TPA



#CFOD13

Increasing Health Care Costs



#CFOD13

2002 2012

$2,137

$4,316

$5,866

$11,429

Employer Contri-bution

Employee Contribu-tion

$8,003

$15,745

Healthcare Costs on the RiseAverage Annual Health Insurance

Premiums & Employee Contributions for Family Coverage

2002-2012

102% EmployeeContribution

Increase

97% Total Premium Increase

Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2002-2012.

Escalating healthcare costs can be attributed to:

Controllable factors

Increased utilization and consumer demand

Increased pharmaceutical spend

Unhealthy behaviors

Lack of consumerism

Uncontrollable factors

Aging population

New medical technology

Federal mandates



#CFOD13

Self-Funded Plans by Firm Size

*Estimate is statistically different from estimate for the previous year shown (p<.05)SOURCE: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 1999-2012.

Percentage of Covered Workers in Self-Funded Plans, by Firm Size ‘02 ‘03 ‘04 ‘05 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11 ‘123-199 Workers

13%

10%10%13%13%12%12%15%16%13%15%

200-999 Workers

48 50 50 53 53 53 47 48 58* 50 52

1,000-4,999 Workers

67 71 78 78 77 76 76 80 80 79 78

5,000 or More Workers

72 79 80 82 89 86 89 88 93 96 93

ALL FIRMS 49 52 54 54 55 59 55 57 59 60 60



#CFOD13

What is Self-Funding? Overview & Cost Savings Opportunities



#CFOD13

Definitions

Fully Insured Medical Plan

Employer contracts with another organization to

assume financial responsibility for the

enrollees’ medical claims and for all incurred

administrative costs.

Self-Funded Medical Plan

Employers directly assume the major cost of health coverage for their

employees. Some self-insured plans bear the entire risk. Other self-

insured employers insure against large claims by purchasing

stop-loss coverage.

Self-insured employers may contract with insurance carriers or third party administrators for claims processing and other administrative services.



#CFOD13

Where Does Your Dollar Go?

Savings

Fully Insured Self-Funded

Administration & Premium

Tax20%

Administration & Tax - 6%Savings - 5%

Claims

80%

Claims

80%

Stop Loss - 9%



#CFOD13

Where’s the Savings?

Savings


Administration & Premium

Tax20%

• Overhead• Direct Costs• Pooling

Charge• Premium Tax• Reserves• Profit

• Claims & Customer Service

• Medical Management

• PPO Network Access

• Financial & Clinical Reporting

Administration & Tax - 6%

Stop Loss - 9%



#CFOD13

What About Claims Dollars?

Savings


Claims

80%

Claims

80%



#CFOD13

The Formula to Stretch Claim Dollars

Claims

80%

Cost Containment Strategies

CreativePlan

Designs

Population Health

Management



#CFOD13

Prospective Population Health Management



#CFOD13

Cost Management Strategies



#CFOD13

Reducing Claims Cost to Increase the Bottom Line



#CFOD13

How Will You Utilize Your Savings?

Physician & Hospital Claim Audit

Coding Review

OON Claims Negotiation

Fraud & Abuse Detection

COB & Subrogation

Discretionary Spending

• Reserves for health care expenses

• Capital expenditures• Other corporate expenses or initiatives



#CFOD13

How Self-Funding Can Help Attract & Retain Talent

Reduce Cost While Improving Care

Target prevalent disease states in your population

Offer wellness incentives

Build morale internally

and….

Cut costs



#CFOD13

Common Concerns & Myths



#CFOD13

Common Concerns & Myths

High cost claimants (stop loss lasers)

Inconsistent cash flow (difficult to budget)

Increased administrative burden (more work)

Inability to tolerate risk (too small)



#CFOD13

Year 1 Year 2 Year 3 Year 4

Self-Funded PlanEstablishing Premium Equivalent and Building Reserves

Health Care Budget

Typically, three out of four years will be better than anticipated



#CFOD13

Traditional & Innovative Solutions to Mitigate Financial Risk



#CFOD13

Stop Loss CoverageFixed Costs – Stop Loss Premiums

SpecificProvides protection for individual catastrophic claims (unknown risk)

Typically covers medical and pharmacy expenses

Lasers = special deductible for known risks

Source: SIIA



#CFOD13

Stop Loss CoverageFixed Costs – Stop Loss Premiums

AggregateProvides maximum liability protection

Source: SIIA



#CFOD13

A Structured Approach to Risk Management

Stability of a fully insured plan with the flexibility and cost savings of a self-funded plan

Extend budget planning from 12 to 36 months with capped liability

Tax-free reserve planning

Stop loss coverage with three years of fixed rates

Ability to maintain unique plan design and contribution strategy



#CFOD13

Remittance Schedule Example



#CFOD13

Is Self-Funding an Option?



#CFOD13

Factors to Considerp Demographicsp Company Stabilityp Medical Trendsp Group Sizep Claims Experiencep Economic Conditions



#CFOD13

Savings ExamplesEmployer Groups Experience the Benefits of Self-Funding



#CFOD13

2010 2011 2012$0.00

$200,000.00

$400,000.00

$600,000.00

$800,000.00

$1,000,000.00

Fully Insured

Small Group Example (76 EEs)

Year 1 Savings

$8,783 or 1.2%

Year 2 Savings

$196,133 or 24.1%



#CFOD13

2010 2011 2012$0.00

$500,000.00

$1,000,000.00

$1,500,000.00

$2,000,000.00

$2,500,000.00

Fully InsuredSelf-Funded

Mid-Sized Group Example (300 EEs)

Year 1 Savings

$470,810 or 20.6%

Year 2 Savings

$242,080 or10.6%



#CFOD13

Your Ideal TPA Partner



#CFOD13

What Are Your Options?

National Carrier

Claims Administrator

s

http://www.google.com/url?sa=i&rct=j&q=concrete%20house%20illustration&source=images&cd=&cad=rja&docid=Pb4Lwl8_DB5kXM&tbnid=YdsjVnTZrzaYYM:&ved=0CAUQjRw&url=http://www.golf.com/photos/augusta-national-clubhouse-photos/clubhouse-illustration&ei=WoACUsaNOoTwyQGkl4C4Dw&psig=AFQjCNG1T7W4NH2ogT6RZu0c3skNk6N6OA&ust=1375982019198435



#CFOD13

What Should You Look For in a TPA Partner?

Dedicated to and experienced in self-funded benefit administration

In-house medical management team

Aggressive cost management programs and services

Commitment to performance guarantees Provides high touch service for clients and plan participants

Provides analysis, insight and innovative solutions Provides complete data transparency

Allows for flexibility and customization



#CFOD13

Why Self-Funding

Increased transparency Lower trendsStrong Partnership

Reduced administrative fees and premium tax; more control over cash flow

Increased ability to impact claims (direct to employer’s bottom line)

Greater flexibility with benefit design (no state mandates)

Potential for higher than expected claims; fluctuation in monthly expenditures

Need assistance in administration; increased responsibility for plan design

Increased Savings



#CFOD13

Self-Funding With The Right TPA Partner

Discretionary Spending

• Reserves for health care expenses

• Capital expenditures

•Other corporate expenses or initiatives



#CFOD13

Thank You!



#CFOD13

Thank You Sponsors!

PLATINUM

GOLD

SILVER

DIAMOND

Take Control & Reduce Health Care Spend

Business

Transcript of Take Control & Reduce Health Care Spend