The Employer Basics
• Affordable Care Act
• The Basics of Self Funding
11106s0513
Edition 05.20.13
Allied National
Overland Park, Ks.
2nd generation
family-owned business
Founded 1970
Insurance Administrator
Our Allied National Culture
Innovation
Stability
Service
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Why would an employer
self fund? Why take the risk?
• Self funding is the most cost effective way to fund a
health plan over the long term.
• If costs are equal, why wouldn’t you choose a plan
that gives you a refund during a healthy year?
3
What does the ACA have to do
with self funding?
• Avoids the high costs & rate shocks of fully insured
plans under the ACA.
• No compensation restrictions for agents – not
subject to MLR regs.
4
Affordable Care Act
• What does it mean for me?
• What does it mean for my business?
• What does it mean for my employee’s health plan?
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For the Individual - Employee
What does ACA mean for
an individual?
1. Individual Mandate says individual must have health insurance
or pay a penalty
• Penalty starts at $95 for 2014 then in 2016 escalates to
$695 or 2.5% of taxable income (which ever is greater)
2. Insurance can be employer provided or an individual plan
• Must be qualifying coverage
3.New health insurance exchanges for 2014
• Only way for individual to receive premium subsidy for
their coverage
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For Your Business - Employer
What you need to
know about ACA for
your business . . . …
7
Do I have to offer health
insurance to my employees?
less than 50
more than 50
Based on full-time equivalent employee counts.
Part-timers count!
8
What type of coverage must I offer?
•
Must offer coverage for all full-time
employees and dependents (not spouses)
•
Must offer ACA defined minimum
essential coverage (MEC) that meets
minimum value
•
Must be affordable for each employee
(“affordable” is defined by their income)
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What is “Minimum Essential Coverage?”
• Must cover a minimum of 60% of expected costs (called
a Bronze Plan in the Exchange/Marketplace)
• Fully insured plans must offer all 10 categories of
essential benefits
• Self-funded plans must only meet the 60% threshold
(“minimum value”)
• Required benefits are determined on a state by state
basis and final regulations in each state are still to come
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What are “Minimum Essential Benefits”?
10 defined essential benefits – must be covered without $$ limits
• Ambulatory patient services
• Emergency services
• Hospitalization
• Maternity and newborn care
• Mental health and substance abuse
• Prescription drugs
• Rehabilitative and habilitative services and devices
• Lab services
• Preventive and Wellness
• Pediatric (including dental and vision)
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What does
“affordable” mean?
Affordable…..
The employer pays enough of the
costs so that the employee’s share
of the cost for single coverage is
not:
• More than 9.5% of the
employee’s W-2 income; or
• More than 9.5% of employee’s
hourly rate of pay * 130 hours; or
• More than 9.5% of FPL
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What does
“affordable” mean?
Example
The affordability test applies
to the employee cost
(premium) only.
Employee Income $28,735
Maximum Contribution by
Employee is 9.5%
$2729 ($227/month)
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What happens to our business if
we do NOT offer health insurance
to our employees?
< 50 full-time employees
•
•
No requirement to offer coverage
No penalties
>50 full-time employees
• Penalty if ANY employee goes to exchange and receives a subsidy:
• Failure to provide Minimum Essential Coverage with minimum value
• $2,000 per eligible full-time employee after the first 30
• Failure to make coverage affordable
• For each employee who buys coverage on the exchange
and receives a premium subsidy the penalty is $3000
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What happens to our business if
we DO offer health insurance to
our employees?
1. It must meet minimum essential benefits standards
2. It must be affordable
3. If it’s affordable and meets minimums –
NO PENALTIES
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Are there any new additional taxes or
penalties under ACA that our
business should be aware of?
YES
• Transitional Reinsurance Tax – minimum $63/head
beginning in 2014; to be adjusted every year through
2016 as required.
• PCORI - Research Tax - $1/person/year in 2013;
$2; in 2014; then indexed to national expenditures.
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Will we still be able to have a health
insurance broker to help us through
this process?
YES….but
Plan on paying a consulting fee such as you
would your accountant or lawyer. Most
agents’ commissions have been greatly
reduced or eliminated under the ACA.
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Insurance Agent vs Healthcare Advisor
Skills
Health Insurance Agent
Healthcare Advisor
Benefit Plan Design
X
X
Marketplace Options – Carriers,
Networks
X
X
Price Modeling
X
X
Pre 2014
Post 2014
ACA Compliance
X
Risk Financing
(Self Insurance)
X
Risk Management (Wellness)
X
Medical Underwriting
X
Employer Cost Allocation
X
HIPAA Compliance
X
ERISA Compliance
X
Employment Law
X
Long Term Strategic Planning
X
Commissions
Fees
X
X
Adverse Impact of Affordable Care
Act on Fully Insured Employers
Increases Cost
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Adverse Impact of Affordable Care Act
on Fully Insured Employers?
Allied “On the Air” Topics
http://www.alliednational.com/ontheair.htm
________________________________________
Insurance Market Reforms
An explanation of what the reforms are, why they're part of ACA and what the rate
impacts will be. Discusses options employers and individuals have to avoid the
large fully insured rate increases resulting from the reform.
Part 1: Affordable Care Act basics:
4 min. 49 sec.
Part 2: Affordable Care Act impacts: 13 min. 30 sec.
Part 3: Employer Options:
6 min 17 sec.
Part 4: Individual Options:
2 min 39 sec.
How can we control the cost of our
health insurance as a business?
Self Insure
Long term, self insuring /self funding is the
most cost effective way
for an employer to fund their
employee health plan –
even for smaller employers.
Why Would a Small Business
Want to be Self Funded?
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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
Eliminates state benefit mandates
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
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Who is self funded now….
Traditional Self Funding
65%
>100
72.8M FTEs
Small Group Self Funding
and Fully Insured
24%
>10 and <100
26.8M FTEs
Fully Insured
11%
<10
12.3M FTEs
100%
111.9M FTEs
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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 to limit risk
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Stop Loss Insurance
Employer’s risk is contained
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
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How Funding Advantage Works
Employer has three monthly costs:
• Claims Fund
• Administrative & Sales Costs
• Stop Loss Coverage
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Self Funded Claim Payment
Sample $60,000 Claim
$33,000
Paid by
Stop Loss
Carrier
Employers Specific Stop Loss
Employers Specific Stop Loss Limit
Employers
Aggregate
Stop Loss
$25,000
Paid from
employers
claim fund
Employers Claims Fund
$2,000
Paid by
employee
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Sample Small Employer
Self Funded Program – 55 lives
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Sample Funding Advantage Plan
No Refund
A new solution for
smaller employers!
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What is Funding Advantage?
•
•
•
•
•
•
•
•
Self Funding “on training wheels”
10 or more lives
Self funding made “SIMPLE”
Prepackaged plan docs, integrated specific
and aggregate stop loss policy
Level monthly payment plan
Terminal liability coverage included
No hidden fees
No complex contracts
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Who is the ideal candidate
•
•
•
•
•
•
•
Experiencing adverse premium impact from ACA
Desires lower costs and predictable cash flow
Being forced to provide health insurance by ACA
Healthy groups
Desires greater control and flexibility
Needs better claims reporting
Promotes health and wellness with employees
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Self Funded Group Health Plans
are subject to “ERISA” regulation.
What is ERISA?
Employee Retirement Income
Security Act 1974
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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
• Limit employee benefit plan options
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Role of Allied as the Self Funded
Plan Administrator
•
•
•
•
•
•
•
•
Assist with plan design
Manage Stop Loss claims
Assist with plan communications
Provide network access
Claims payment
Large claims management
Manage claim cost containment vendors
Reporting and compliance services
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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
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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
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Why Would a Small Business
Want to be Self Funded?
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Why Would a Small Business
Want to be Self Funded?
“Employee Only” Rate
“Employee Only” Rate Illustration
$700
$600
2014-2015 ObamaCare
Rate Shocks
$500
$400
$300
2013
2014
2015
Year
2016
2017
This sample chart illustration is provided for educational purposes only. Actual results may vary and are not indicative of future performance.
Allied National, Inc. l 4551 W. 107th St. Suite 100 l Overland Park, KS 66207 l 888-767-7133 l sales@alliednational.com l www.alliednational.com l
twitter.com/alliednational
2018
11149s0513
Funding Advantage vs Fully Insured
55 lives (for illustrative purposes only)
Year
Funding Advantage
ACA Compliant
Fully Insured
ACA Compliant
Difference
2013
$305,412
$305,412
$0
2014
$335,953
$427,577
($91,624)
2015
$369,549
$534,471
($164,922)
2016
$406,503
$598,608
($192,104)
2017
$447,154
$670,440
($223,287)
Total
$1,864,571
$2,536,508
($671,937)
Claim Refunds
(15%)
($279,686)
$0
($279,686)
Net Cost
$1,584,885
$2,536,508
$951,623
Increased Cost
60.04%
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Next Steps
1. Agent contacts Allied
2. Current census
3. Plan design & benefits
4. Current and renewal billing
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Life Cycle of a Funding Advantage Client
start
Suspect
Renewal
Appointment
Conceptual
Presentation
Reports
Service
Claims
Sales
Data Collection
Street Quote
Services
Plan Docs Issued
Installation
Underwriting
Close
Enrollment
Underwriting Reviews
Final Proposal
to Client
Allied Offer of
Final Rates
10991s0812
Allied National, Inc. l 4551 W. 107th St. Suite 100 l Overland Park, KS l 888-767-7133 l sales@alliednational.com l www.alliednational.com l twitter.com/alliednational
WARNING!
Projected market
capacity bottleneck.
4th Quarter 2014
DON’T WAIT!
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In the works with
Allied National!
Unique small group self funded
product for the low wage
employee
3rd Quarter 2013
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Thank you!
For more information:
Allied Sales Support
888-767-7133
www.alliednational.com
sales@alliednational.com
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.
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