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
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.