Chet Rhoads
The HDH Group
November 19, 2014
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83% of firms with 25-49 employees offer
health insurance
91% of firms with 50-199 employees offer
health insurance
98% of firms with 200-999 employees offer
health insurance
100% of firms with 1,000 employees or
more offer health insurance
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Most important Asset comes with a price
Best talent in Labor Pool
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Innovation
Competitive Advantage
Compete with Global Markets
Relationship Pipeline
Competitive Wages are Comprised by
unsustainable healthcare costs
◦ Competitors that can control healthcare cost will
have the advantage of attaining/retaining best
talent
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Will not sustain healthcare costs over time
Typically transfers more of the burden on
employee
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Carriers and legislation can impose limits
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Engagement of employee workforce limited
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Higher deductibles, versus higher employee
contributions
Implement coinsurance for in-network services
Higher ER co-pays
Health Reimbursement Account (HRA)/Health
Savings Account (HSA)
Spousal Mandate/Surcharge (Working Spouse
Provision)
Prescription Drug Programs
◦ Mandatory Generic
◦ Mail Order
◦ Formulary
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Sustain healthcare costs over time
Encourage employees/dependents to make
better healthcare decisions
Encourage employees/dependents to conduct
better behavioral lifestyles
More latitude with carriers and legislation
Over time, a culture is created for invested
and engaged workforce
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Alternative Funding Arrangements
◦ Self-Funding – Cost Plus, Administrative Services
Only (ASO)
◦ Captive
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Prescription Drug Carve-Outs
Defined Contribution/Private Exchange Model
Wellness
Data Integrity
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Remit monthly premium to insurance carrier
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Carrier in turn will pay:
◦ Claims
◦ Administration
◦ Reinsurance
◦ Pros
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Predictable budget
Less volatile compared to self-funding
Carrier pays PPACA fees on client’s behalf
Client not responsible for run-out claims
◦ Cons
Carrier uses past claims experience to determine future rates
Premium payments do not reflect real-time claims changes
Carrier sets the pooling level ($125K)
Administration built into the rates is higher than a selffunded arrangement
 2-3% annual fee on health insurance providers only applies
to fully-insured plans (2014)
 Premium taxes
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A trade off of short term stability for long term cost
savings
Assume more risk/opportunity for more reward
Pay carrier a monthly or weekly administrative fee for
claims adjudication, billing, eligibility, customer
service, etc…
Purchase Stop Loss Insurance
◦ Specific: Protects client when claims incurred during
policy year on any one member exceed specific liability
◦ Aggregate: Protects client when claims incurred during
policy period exceed a certain corridor above expected
claims
Pay actual claims less stop loss reimbursements
monthly
Reserves – Held by Carrier or Client
Settlement – Annually if carrier hold reserves
◦ Pros
 Good years; ABC Company experiences immediate savings
 ABC Company chooses the amount of risk to retain via the specific
deductible
 Carrier does not profit as a result of good claims
 ABC Company holds onto excess reserves instead of paying them to a
carrier
 Avoid 2-3% fee on health insurance providers (2014) and premium taxes
 Administration of the plan less expensive
 Carrier renewal rates irrelevant (used for COBRA and budgeting)
◦ Cons
 Bad years; possibility of spending more than fully-insured rates
 More volatile compared to fully-insured (volatility a function of stop loss
specific deductible)
 Client responsible for run-out claims in the event of a carrier
change/termination of plan/layoffs
 Carriers do not remit PPACA fees on client’s behalf – Employer pays fees
annually based on members
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Captive
◦ A member-owned insurance company
◦ Initial captive structures were created for the
Fortune 500 (e.g. Exxon, IBM, Xerox)
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Group Captive
◦ Provided the advantages of a captive to small and
mid-market employers
◦ Over 50% of mid-sized employers are in an
alternative risk program
Medical Group Captive
Self Funded
Fully Insured
Yes
No
No
May hold til yr. end
Yes
N/A
Yes, but limited
Yes
N/A
Yes
Yes
No
3
2
1 (carrier)
Yes - in Captive level
No
No
Yes - at level 3
Yes - at level 2
Yes
No
Yes
Yes
Yes - Letter of Credit
Reserves - possibly waived
No
Yes
Yes
No
Yes - but lose any claim to
refund
Yes - but responsible for runout
Yes
Yes
Yes
Yes
Yes - limited
Yes
Yes
Biometric screening/HRA required
Yes
No
No
Requires Wellness for all members
Yes
No
No
Flexibility/negotiation on fixed costs
No
Possibly
Possibly
Yes - every renewal
Yes - first year/not at renewals
No
Medical Underwriting/could be declined
Timely reimbursements
Group selects Stop Loss Spec Level
Good Cash Flow needed
Risk Levels
Risk Sharing
Liability capped
Flexibility on renewal date
Up front cost
Should be considered for long term
Able to terminate arrangement
Flexibility on plan design
Flexibility on Carrier
Claim lasering possible
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Plan sponsor chooses a Pharmacy Benefit Manager
(PBM) to administer and manage prescription drug
benefits separate from the PBM contracted with
the health plan
Plan sponsor ends up paying less in administrative
fee by contracting directly with a PBM on a carveout basis
Plan sponsors are able to remove fees that bear
no relationship to the performance of their plan or
the cost of providing a pharmacy benefit
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Negotiating contract terms and conditions
Audit rights
Clinical management
Risk management programs
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Allows for aggressive price negotiations
◦ Governs pricing, discounts and rebates
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Allows for carve-out specialty Prescription Drugs
Customized Clinical Programs
Medical Program must be self-funded to have
ability to carve Prescription Drug Program out
Caution! – It is important that data feeds between
PBM and medical carrier/administrator take place
for integration of pharmacy benefit claims and
medical claims
Private Exchange Model Video
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Employer Defines their Contribution (flexible
choices to fit your management philosophy and
budget).
Offers employees multiple benefits choices.
Employees value choice and the ability to create a
benefit plan that fits their needs.
New Model:
Employees get
to select the
benefits that
make sense for
their lives
Chris & Family
Previously $1,000
Now is $750
Defined Contribution Helps Create Engaged
Employees by:
• Providing choice
• Providing decision making tools
• Creating a purchasing venue that is easy for the
employee to evaluate the options and enroll in
plans that make sense for them
Participatory
Activities Only (Health Contingent)
Outcomes Based (Health Contingent)
Tobacco Program
Primary Feature
Employees are asked to
participate in an event such
as a biometric screening or
Health Risk Assessment.
Generally verifiable
information is used.
Employees are asked to obtain a
certain health outcome within the
normal range to obtain an incentive
or avoid a surcharge. Example: an
employee who scores outside the
normal range for BMI will not
obtain the reward or avoid the
surcharge. Generally VERIFIABLE
information is used.
Typical Employer Objective
Entry Level-Educate employees
about their personal health
Does not apply
Employees are asked to
participate in an activity
related to a health factor.
Example: an employee who
scores outside the normal
range for BMI may be asked to
participate in a walking
program to obtain a reward or
avoid a surcharge. Generally
SELF-REPORTED information
is used
Provide employees with various
activities to support good health
Applies
Tobacco has it's own unique incentive/
surcharge amount as well as the
requirement that tobacco users
do not need to quit using
tobacco. They need only to participate
in a tobacco cessation program to
qualify for an incentive or avoid a
surcharge. There is not limit to the
number of times a tobacco user may
go through a cessation program and
still qualify for the reward.
Reduce or eliminate tobacco usage
Based on participating in an
activity related to a health factor
30% of the individual
monthly premium
Based on reaching goals related
to a health outcome or factor
30% of the individual
monthly premium
Meet the 5 Wellness Requirements *
for Health Contingent Programs
Application of
Incentives/Surcharges
Maximum Incentive/
Surcharge eff. 1-1-14
Reasonable Alternative
Standards (RAS)
Based on participating
in an event
No limit
Manage risk/Reduce claims & improve
productivity/Accountability
Applies
Not required to provide RAS
RAS can be another less
RAS can be an activity or an easier
strenuous activity. MD
to achieve health standard. MD
verification permitted to prove
verification of health
health condition
conditions not permitted
Incentives will be treated as if they were not earned(effectively having no impact on the 9.5%
calculation) while surcharges will be treated as if they apply to all employees (effectively
reducing the 9.5% by the maximum possible surcharge available to any employee)
Impact of Incentives/
Surcharges on the 9.5%
Affordability Test in 2015
(Final rules have not been released)
*Frequency, Size of Reward, Reasonable Design, Uniform Availability/RAS, Notice of RAS
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Applies
Based on participation in a tobacco
cessation program or actually quitting
50% of the individual monthly
premium, whether stand-alone or
integrated with other surcharges
RAS MUST be a tobacco cessation
type of program
A tobacco surcharge will be treated as
if no employee qualified for the
surcharge (effectively having no
impact on the 9.5% calculation)
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Delivering available, complete, accurate data
on time
Transforming information into actionable
knowledge that empowers the continuum of
patient care
◦ Significantly enhances patient and population
health
◦ Control cost
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Creates venue to:
◦ Optimize care
◦ Improve outcomes
◦ Control Costs
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Trust & Secure – Cleansing, Archiving,
Safeguarding, and Controlling Data
Visibility – Online financial and clinical
dashboards, population health trends and
analysis
Insight – Data driven underwriting analysis,
benchmarking and modeling for plan design
Optimize – Financial Risk Pools driven by
predictive analytics
Thank you for your
attention.
Questions…?