2. The Cost of Employee Benefits
• Escalating health care costs in recent years have made it
increasingly difficult for employers to provide health
insurance benefits to their employees at a reasonable
cost.
• As a result, employers have sought alternative ways and
means to keep the costs of their benefit programs under
control. Some have opted to drastically reduce benefits,
others have chosen to change insurance carriers
frequently, utilizing whichever insurance company
happens to have competitive rates at that time.
• Both of these can have a negative effect on employees,
and is certainly only a short term solution to cost
control.
3. What Is My True Cost?
• Most employers with less than 100 employees insure
through the fully insured marketplace.
• It is frustrating that these employers rarely ever or
never get to see what their actual claims experience is
during a given year, especially when they know they
have low claim utilization. In many cases this employer
is heavily subsidizing an insurance risk pool whose loss
ratio is much higher than his own.
• We believe that a long-term solution to managing
benefit costs and providing quality benefits involves
getting all the facts about your own experience
4. Impact of PPACA (Healthcare Reform)
• The Patient Protection and Affordability Act (PPACA)
is a sweeping legislation that will have a long-term
impact on the cost of providing employee benefits,
especially in the 50+ employee market segment –
referred to as the ‘Pay of Play’ segment.
• Fortunately, ERISA plans (governing law for self-
funded plans) are exempt from the rate restrictions
imposed under PPACA
• This is true for employers with as few as ten
employees – Self-funded plans work in companies
with as few as ten employees
5. Feasibility of Self-Funding
• We believe that traditional fully insured group plans require
employers to over-insure their employee benefits. This
enables the carrier to charge high premiums, establish a
reserve to its own liking, benefit from the use of your
reserve funds and profit further from the low claim
utilization of your group.
• As an alternative, why not share in the financing of the plan
to the extent that it is feasible from an experience
standpoint?
• Self-funding means sharing in the surplus, but it also means
sharing in the risk. You, as the buyer, however, have the
privilege of sharing only in the risk that your own
circumstances dictate.
6. Self-funding and PPACA
• ERISA Plans do not have to comply with these
PPACA regulations:
– Market reforms – community rating, Essential
Health Benefits (EHB), metal level plans (Exchange
benefit levels), out-of-pocket caps and deductible
limits (Exchange cap is $2000/$4000)
– Exchanges
– Medical Loss ratio
– New National Premium Tax
7. Self-funding and PPACA (cont’d)
• ERISA plans will comply with following PPACA
regulations:
– 105H
– Employer Mandate
– Employer Reporting
– New Reinsurance fee, comparative effectiveness fee and
Cadillac tax
– All September 23 reforms
– Summary of Benefits and Coverage (SBC)
– Prohibitions on lifetime and annual limits
– Prohibition of 90+ day waiting periods
– Auto-enrollment
8. Group Health Risks
Risks can be categorized as:
• PREDICTABLE LOSSES
– Those losses that occur frequently, but are relatively
insignificant in size and are predictable based on the
group’s makeup of age, sex and plan of benefits.
• UNPREDICTABLE LOSSES
– Those classes occur infrequently, but are catastrophic
in terms of size.
9. Cost Efficiency
• The most efficient purchase of insurance is to insure for
unpredictable losses not predictable losses. No matter how
high the cost of medical care, statistics indicate that
adverse claims experience normally is a result of extensive
claims by a limited number of individuals. Consequently, it
is wise to purchase insurance to protect against this risk.
The amount of insurance necessary is dependent upon the
size of the group. A smaller group requires more protection
than a large group.
• By purchasing insurance only for unpredictable or
catastrophic claims, you greatly reduce high premium costs
and thereby create cash savings to fund for predictable
claims.
10. Features of Self-Funding
• REDUCED FIXED COSTS
A Third Party Administrator will administer your plan with less overhead expense than an
insurance carrier.
• LOW CLAIMS UTILIZATION
Most group insurance plans have no provision for refunding overpayment of premium, effective
coordination or subrogation of benefits.
• REDUCED PREMIUM TAX
Premium tax is normally computed as a percentage of premium.
• INTEREST OR RESERVES
Your company retains the claim reserves traditionally held by insurance companies.
• SELF-FUNDING
A method of funding benefits to pay for anticipated losses, with provisions for stop-loss coverage.
11. How Stop-Loss Works
Stop-loss coverage comes in two forms: Specific and Aggregate.
• SPECIFIC STOP-LOSS PROTECTION
This provides a maximum dollar amount of all covered claims that a benefit plan
would pay on any one individual during a plan year. The stop-loss carrier
reimburses the plan for claims paid in excess of the specific stop-loss.
• AGGREGATE STOP-LOSS PROTECTION
This is protection coverage to limit the total liability on all participants on a small
plan year basis, thereby allowing the plan to budget for a maximum annual
liability.
• THIRD PARTY ADMINISTRATOR
A third Party Administrator is a licensed administrator providing all of the
administrative services previously rendered by your insurance carrier.
12. Plan Mechanics
• Under self-insurance, employers put money into a trust
fund (regulated by ERISA) to pay employees' medical
claims. This option comes instead of paying an
insurance company a fixed, negotiated fee to pay the
claims. The trust fund keeps any profits on behalf of
workers to offset future expenses.
• To make sure they don't end up paying too much for
catastrophic losses, such as if several workers required
extremely costly heart transplants, self-insured firms
also buy re-insurance, allowing them to set in advance
the maximum losses they face (Aggregate Stop-Loss).
14. Our TPA – Self-Funded Plan Administrators
• Self-Funded Plan Administrators (SFPA) is a Third Party Administrator (TPA)
dedicated solely to the administration of self-funded employee benefit
plans. Affiliate companies include a large national pharmacy network
providing prescription card and mail order services..
• Our mission is to provide timely and cost effective services to our clients in
order to achieve their health benefit objectives. We maintain state-of-the-
art hardware and the QicClaim/2 Health Claims Management System from
Resource Information Management Systems, Inc. (RIMS) to enable us to
provide timely and responsive administrative services to our clients. Over
400 administrators use QicClaim/2 nationally and RIMS is recognized as the
leader in the development of employee benefit software.
• We believe an employer’s health benefit plan should be established on a
partnership basis with the administrator meeting the specific needs of each
client and its employees. PBA has acquired the sophisticated systems and
attracted and developed a high quality staff of dedicated employees to meet
each individual client’s requirements.
15. Benefit Administration
SFPA’s benefits administrative capabilities lie within the Qic-Claim/2 Health Claims
Management System. The following information highlights the features and benefits of
the modules we use to efficiently operate your employee benefit plan(s).
• Enrollment Processing (including application processing and billing)
– Single screen entry of enrollee date
– Creation of free-form letters
– Automatic generation of COBRA related letters
– Creation of all billing records from the enrollment file
• Claim Rules
– Claim Rules contains a universal decision matrix representing a comprehensive set of rules
containing tens of thousands of combination required to adequately cover the full spectrum of
claims possibilities.
– Allows plan builders to bring a deployed master plan into conformance with plan specific
requirements.
– Ensures accuracy of claims adjudication by creating rules that are consistent across all plans.
16. Benefit Administration (Cont’d)
• Auto Audit
– Provides editing for unbundling/re-bundling
– Cosmetic/discretionary procedures
– Identification of investigational procedures
– Repeat procedure management
– Identification of obsolete procedure codes
– Provider specific editing
• Procedure Driven Claims/Encounter Adjudication
– Automatically determines payment codes and calculations using standard claim/encounter
processing data
– Compatible with all industry accepted procedure code sources: CPT-4, HCFA, ICD-9 and HIAA
– Combines multiple criteria such as place of service, diagnosis and provider type to accurately
apply plan parameters.
17. Benefit Administration (Cont’d)
• Flexible Report Package
– Provides an extensive menu of standard reports
– Allows custom reporting from existing report menu
– PPACA Required Reports
• PPO Pricing
– Allows for automated loading and pricing of unlimited PPO fee schedules
• Pharmacy Benefit Management
– We use national pharmacies which provides deep discounts and plan design flexibility
• Combined Billing Fulfillment
– Combine multiple providers under one monthly statement
18. PPACA Compliance Services
We provide all required compliance testing for Safe
Harbor benefit plans, including:
• Non-Discrimination Testing
• Eligibility Testing
• Benefits Testing
• Affordability Testing
• Self-funding Feasibility Studies
• Defined Contribution Plan Feasibility Studies
• ‘Simple’ Cafeteria Plan Documents
19. How Do I Get A Proposal?
Contact us today at:
• Doug Helser, CBC
– Office: 614-635-8678
– Cell: 614-961-0339
– Email: Dhelser@self-funded.com
Offices in Columbus, Omaha and Las Vegas
