1. Self Insuring…
Take Control of Your Health Plan Destiny
“Size” no Longer Matters!
Wellness and Risk Management can Benefit
Your Bottom Line – instead of your carrier.
Presented by

2. Presentation Overview
• Self Funding – Basics
• Self Funding Statistics
• 80/20 rule; Major in the Major
• What are the Components
• How the right components manage risk
• Why Many say they Manage the Risk and
don’t

3. Self Funding Basics
“Self Funded” health plan modeling is no longer for just the large
employers. New stop loss products that work for groups as
small as 10 in some States. Minnesota minimum is 25
Self-funding part of the health plan risk can deliver the following
benefits while still “bookending” the maximum and individual claim
risk for almost any size company.
• Plan design flexibility
• Reduced fixed costs
• Bottom line savings from better “risk management”
• Understanding of where the plan’s money is being spent
through detailed reporting – own your own data.

4. Self Funding – Basics
• Size: 10 Employees covered and up
• Basics: Purchase Stop Loss Insurance – Several types…
- Individual Specific Deductible Stop Loss: ($35,000 example)
Employer self insures claims on each member up to this level
- Aggregate Stop Loss Insurance:
Adds all claims beneath the Individual Specific together for to
give the Plan an Annual Maximum Claims Exposure
- Monthly Stop Loss
Plan costs cannot exceed any more than 1/12th of the annual
aggregate liability. Cash flow just like fully insured.

5. TPA verses Carrier ASO Self Funding
• Carrier ASO Model: “Administrative Services Option (ASO” This model
is a Bundled program. Every process and component is owned and
managed by the Carrier
(Stop loss, RX, Administration, Subro, Chronic Disease, Wellness)
• TPA Model: “Third Party Administrator (TPA)” These are unbundled
programs. Every Process and component stands on it’s own merit –
“best of breed” is the goal. In most cases any one of these can be
changed out each year if a better option is available without disruption
to a member.
• ERISA/ PPACA New language in PPACA and old ERISA rules could
find the ASO model “insurance” due to control by one source.

6. Self Funded verses Fully Insured
The Best
Solutions
• Federal regulations (ERISA) instead of State Mandates when self
funded.
• State “Small Group” reform will impact <100 ee groups dramatically
by 2014. Many fully insured small group carriers may leave the
market.
• Many carriers today are building “small group self funded” platforms
or vendor partnerships.
• Fractured Risk pools in Fully Insured Plans.

7. Fully Insured vs. Self-Funding
When properly administered, employees will see little difference between a
Fully Insured Plan and a Self-Funded one.

8. Small Group Cash Flow model

9. A Minnesota Foundation
• The Group: 16/S, 12/S+1, 14/Family = 42 covered employees
• The Plan: $250 Deductible then 100%
• 2009 Fully Insured equivalent premium* = $696,467
Self funded Plan Cost = $595,454
• 2010 Fully Insured equivalent Premium* = $802,075
Self Funded Plan Cost = $588,175
• 2011 Fully Insured equivalent Premium* = $957,430
Self Funded Plan Cost = $597,454 (annualized)
Had group fully insured = $2,455,972 (09-11)
Self Funding they spent = $1,781,083
Saved $674,889
* The $250/ded then 100% plan is not available fully insured

10. The Cost of Benefits, Self-Funded vs. Fully Insured and the
Anticipated Affects of Healthcare Reform Over the Next 3 Years
Fully Insured
Self-Funded
•Minimum Loss Ratios
Y
N
•Restrictive Minimum Essential Coverage
Y
N
•Increased Federal Taxes
Y
N
Self-Funding
vs. Fully Insured Annual Costs (in
•Risk Pools
thousands)
$260
Y
N
$233
$206
$179 Self-Funded
Fully Insured
$152
$125
1 2 3
Assumes a 25% per year increase for the Fully Insured
program

11. So Why Self Insure?
•80% of a health plan’s costs come from
- High cost chronic conditions
- Over utilization and non integrated Wellness
When you Self Insure the Plan Sponsor (Employer)
directly benefits from MANAGING THE RISK
When you are a small group and fully insured,
Managing the Risk does not directly affect your rates
Now Let’s Look At Managing the Risk

12. Why Manage the Health Risk?
Because 80% of a self funded plan costs
Are due to chronic conditions seeing the
wrong providers.
And investment in wellness and CDM
Saves Money
Good Health is Good Business
Especially if you are a Self Funded Plan

13. Managing the Health Risk Will Save You Money
 By helping the chronically ill members maintain
necessary standards of care
 That means less healthcare expenses for the plan

14. The 80/20% Rule
Major in the Major - Not the Minor
What to Focus Health Plan Costs Risk Manager
on as a Healthcare
Fixed Costs
Claims Share of Benefit Premiums
Factors Contributing to Increase in Premiums
87% Administrative Costs
13%
Other Medical Services
Physician
5%
33%
General Inflation Prescription Drugs
14%
Increased Utilization
Outpatient
Healthcare Price Increases in Excess of Inflation Hospital Inpatient
15%
20%
SOURCE: US Bureau of Economic Development, Milliman USA Health Cost Index,
SOURCE: PriceWaterhouse Coopers’ estimates
Centers for Medicare and Medicaid Services

15. Managing the risk when self funding demand….
Actionable Data
Identify the cost drivers of the health plan
Demographics
Illness burden – chronic and acute conditions
Provider utilization
Provider cost (unit prices)
15

16. True Risk Management Helps Manage….
Appropriate Utilization
Healthy Well
• Eat Right
• Healthy Lifestyle
• Few Claims
Unhealthy Well
• Unhealthy Diet
• Unhealthy Lifestyle
• More Claims
54% of population
generates 98% of cost
Chronically Ill
• Identified Illness
• Require Attention for
Compliance
• Highest Cost
20% of population
generates 80% of cost

17. Chronic Disease Management
As Consultants the Health Plan Vendor Should Answer these questions
• Ask How Many Chronic Diseases do they “manage”?
• Ask How Are They Managed? (or is it just what they cost?)
• Do They Utilize Registered Nurses - specifically trained in Motivational Interviewing
and Coaching Techniques
• Is the CDM program “opt in or out?” How are members contacted?
• How is this “contact” reported?
• Do They Integrate all the related risk management programs to the chronic disease
program (HRA, RX etc.)
• Stop loss carriers should recognize value of the right program and provide discounts
on their premiums. Do they? If not SHOP THE STOP LOSS!
17
• Can they report how the progress and results of the program are working? Is there a

18. The Right Vendor Has Proven Results
The best Practice/Systems Manage Risk
• The Chronic Disease Management Program has documented the
following results:
– Multiple payers in two different large geographic areas of the
country saved between 6.4% and 7.3% of total medical claims
cost each year by using a proven model for managing chronic
conditions
– After 5 years these multiple payers
saved between 11-17% of medical
claims costs under this system.
You can model for managing chronic
conditions
This Client had 28% saved over insured trend
18
So they continue funding their 100% Plan…

19. What is Predictive Cost Modeling?
 This Modeling tool provides an employer with a Health Care
Index (state of wellness number) now and in the future.
 Predictive Modeling identifies who will be the next high dollar
claimant twelve months in advance
 Large claim prevention can be instituted along with more
accurate budget forecasting
 Do you know how many diabetics you have? How many type 1
and 2? How many are getting their minimum standards of care?

20. Now Add in Wellness to the Risk Management Pot..
Non-Integrated Management System
Each service works independently – you end where
you began.
Ask a Predictive Ask a Predictive
Modeling Some Nurse Modeling Some Nurse
Nurse Intervention Nurse Intervention
=
Health Risk UM Health Risk UM
Assessment Precert/ Assessment Precert/
LCM LCM
Repo Repo
rting rting
Incentive Incentive
Programs Hospital/ Programs Hospital/
Physician Physician
discounts discounts
Ongoing Ongoing
Educational Educational
Materials On site testing Materials On site testing
Chronic Chronic
Physician Profiling Disease Physician Profiling Disease
Mgmt. (3-5 Mgmt. (3-5
(Credentials/Pricing) Conditions) (Credentials/Pricing) Conditions)

21. Self Funded Integrated Management System
The services work together to provide an end result
where the whole is greater than the sum of its
parts.
Data Health Risk Advanced
Mining Assessment UM
=
Comprehensive Quality
Predictive
CDM
On Site Nurse
Physician
Modeling Actionable Data
Profiling
Controlled Healthcare Costs
Healthier Employees
Incentive On Site Educational
Programs Testing Curriculum
Episodic
Professional
Analysis
Physician &
Telephonic Reports
Nurse Coaches
Hospital

22. Integrated Wellness – with incentives
Self Funding and the Members…
A “risk managed” self funded Plan
empowers members to identify their
health needs and proactively
address them.
Integrated, claims based, Health Risk Assessments (HRA)
And other custom designed wellness plans & Profiles

23. THE Best HRA Should…
Identifying Individual Health Needs
As a TPA this is
how ours works:
Employees have 24/7
access to SOMI
Healthier You through
somi.com
Simply log in as normal
and select the “Personal
Wellness Advisor” which
is powered by the
American Health Data
Institute (AHDI)

24. Example of a good HRA…
Personal Health Risk Assessment
How SOMI Healthier self funded members
Step 2: Complete the Personal Health Risk Assessment

25. Example of a good HRA
Personal Health Summary Report
How SOMI Healthier You Manages Risk
Step 3: Review your Personal Health Summary Report

26. Example of a good HRA
Personal Lesson Plan
How SOMI Healthier You Manages Risk
Step 4: Getting Started on Your Personal Lessons!

27. Member Education = Part of Risk Management
Self-Care Resources
How SOMI Healthier You Manages Risk

28. Why Are We Self Funding Again?
What Can be Achieved With a Well Designed and
Implemented Healthcare Risk Management Program?
• There is an economic and human return on investment
• Economic return ranges between 4:1 to 7:1
• Managing the health risk should positively impact reinsurance
options
• A healthier workforce can impact the following ancillary areas:
• Absenteeism (unscheduled)
• Workers’ Compensation loss ratios
• Disability
• Productivity
• Employee retention, attitude and performance
• It is the only mid to long term strategy to control healthcare costs and
empower employees to become better consumers of healthcare 28

29. How to See what is best for you
• Consider having a comprehensive Benefit Audit done:
- Independently measure your current program against the
latest market options. You don’t know what you don’t know
• Consider going through underwriting if under 50 employees. You
may be a better than average risk for self funding
• Don’t worry about possible plan design changes or access until
you complete an audit. Most of the time the plan can rep the
current one and no one has to change providers.

30. Total Benefit’s Audit
Why Do a Benefits Audit?
Most of us Don’t Know what We don’t know…
• Compliance; Operationally and Procedurally
• Are you satisfying the Fiduciary Liabilities?
• Are there ways to streamline, enhance and be more efficient?
• Are renewal dates, plan options & eligibility requirements consistent?
• In working with bargaining units – do you Comply?
• Are you paying the right price for the right contract?
• How does PPACA impact you now and in the future.
• Can you manage your Plan Risks better? How is it working now?
• Find an actionable multi year strategy to consider
• How are the current vendor partners performing in all areas
• Does your benefit program meet budgetary guidelines?
• How do you compare – Benchmark Data
• Can you outsource more and save money?
• Are you charging your employees and COBRAs the right rates?

31. Thank you!
Cindy Sheffield, CEO
President
SOMI
csheffield@somi.com
651 695 2525