Take Control & Reduce Health Care Spend
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This document provides an overview of self-funding health plans and their potential benefits compared to fully insured plans. It discusses how self-funded plans can help reduce rising healthcare costs through cost containment strategies and population health management. While self-funding carries some risks, partnering with an experienced third party administrator can help mitigate financial risk and maximize savings opportunities. The document examines factors to consider in evaluating whether self-funding may be suitable and provides examples of savings achieved by employers that have adopted this approach.
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Take Control & Reduce Health Care Spend
- 1. 1© 2013 Take Control and Reduce Health Care Spend Presented by: Laura M. Smith
- 2. 2© 2013 Agenda Challenges What is Self-Funding Benefits of Self-Funding Risks with Self-Funding Am I a good candidate for Self-Funding? Partnering with the right TPA
- 3. 3© 2013 Increasing Health Care Costs
- 4. 4© 2013 2002 2012 $2,137 $4,316 $5,866 $11,429 Employer Contribution Employee Contribution $8,003 $15,745 Healthcare Costs on the Rise Average Annual Health Insurance Premiums & Employee Contributions for Family Coverage 2002-2012 102% Employee Contribution Increase 97% Total Premium Increase Source: Kaiser/HRET Survey of Employer-SponsoredHealth Benefits, 2002-2012. Escalating healthcare costs can be attributed to: Controllable factors Increased utilization and consumer demand Increased pharmaceutical spend Unhealthy behaviors Lack of consumerism Uncontrollable factors Aging population New medical technology Federal mandates
- 5. 5© 2013 Self-Funded Plans by Firm Size *Estimate is statistically different from estimate for the previous year shown (p<.05) SOURCE: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 1999-2012. Percentage of Covered Workers in Self-Funded Plans, by Firm Size ‘02 ‘03 ‘04 ‘05 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11 ‘12 3-199 Workers 13%10% 10% 13% 13% 12% 12% 15% 16% 13% 15% 200-999 Workers 48 50 50 53 53 53 47 48 58* 50 52 1,000-4,999 Workers 67 71 78 78 77 76 76 80 80 79 78 5,000 or More Workers 72 79 80 82 89 86 89 88 93 96 93 ALL FIRMS 49 52 54 54 55 59 55 57 59 60 60
- 6. 6© 2013 What is Self-Funding? Overview & Cost Savings Opportunities
- 7. 7© 2013 Definitions Fully Insured Medical Plan Employer contracts with another organization to assume financial responsibility for the enrollees’ medical claims and for all incurred administrative costs. Self-Funded Medical Plan Employers directly assume the major cost of health coverage for their employees. Some self-insured plans bear the entire risk. Other self-insured employers insure against large claims by purchasing stop-loss coverage. Self-insured employers may contract with insurance carriers or third party administrators for claims processing and other administrative services.
- 8. 8© 2013 Where Does Your Dollar Go? Fully Insured Self-Funded Administration & Premium Tax 20% Administration & Tax - 6% Savings - 5% Claims 80% Claims 80% Stop Loss - 9%
- 9. 9© 2013 Where’s the Savings? Fully Insured Self-Funded Administration & Premium Tax 20% • Overhead • Direct Costs • Pooling Charge • Premium Tax • Reserves • Profit • Claims & Customer Service • Medical Management • PPO Network Access • Financial & Clinical Reporting Administration & Tax - 6% Stop Loss - 9%
- 10. 10© 2013 What About Claims Dollars? Fully Insured Self-Funded Claims 80% Claims 80%
- 11. 11© 2013 The Formula to Stretch Claim Dollars Claims 80% Cost Containment Strategies Creative Plan Designs Population Health Management
- 12. 12© 2013 Prospective Population Health Management
- 13. 13© 2013 Cost Management Strategies
- 14. 14© 2013 Reducing Claims Cost to Increase the Bottom Line
- 15. 15© 2013 How Will You Utilize Your Savings? Physician & Hospital Claim Audit Coding Review OON Claims Negotiation Fraud & Abuse Detection COB & Subrogation Discretionary Spending • Reserves for health care expenses • Capital expenditures • Other corporate expenses or initiatives
- 16. 16© 2013 How Self-Funding Can Help Attract & Retain Talent Reduce Cost While Improving Care Target prevalent disease states in your population Offer wellness incentives Build morale internally and…. Cut costs
- 17. 17© 2013 Common Concerns & Myths
- 18. 18© 2013 Common Concerns & Myths High cost claimants (stop loss lasers) Inconsistent cash flow (difficult to budget) Increased administrative burden (more work) Inability to tolerate risk (too small)
- 19. 19© 2013 Year 1 Year 2 Year 3 Year 4 Self-Funded Plan Establishing Premium Equivalent and Building Reserves Health Care Budget Typically, three out of four years will be better than anticipated
- 20. 20© 2013 Traditional & Innovative Solutions to Mitigate Financial Risk
- 21. 21© 2013 Stop Loss Coverage Fixed Costs – Stop Loss Premiums Specific Provides protection for individual catastrophic claims (unknown risk) Typically covers medical and pharmacy expenses Lasers = special deductible for known risks Source: SIIA
- 22. 22© 2013 Stop Loss Coverage Fixed Costs – Stop Loss Premiums Aggregate Provides maximum liability protection Source: SIIA
- 23. 23© 2013 A Structured Approach to Risk Management Stability of a fully insured plan with the flexibility and cost savings of a self-funded plan Extend budget planning from 12 to 36 months with capped liability Tax-free reserve planning Stop loss coverage with three years of fixed rates Ability to maintain unique plan design and contribution strategy
- 24. 24© 2013 Remittance Schedule Example
- 25. 25© 2013 Is Self-Funding an Option?
- 26. 26© 2013 Factors to Consider Demographics Company Stability Medical Trends Group Size Claims Experience Economic Conditions
- 27. 27© 2013 Savings Examples Employer Groups Experience the Benefits of Self-Funding
- 28. 28© 2013 $0.00 $200,000.00 $400,000.00 $600,000.00 $800,000.00 $1,000,000.00 2010 2011 2012 Fully Insured Self-Funded Small Group Example (76 EEs) Year 1 Savings $8,783 or 1.2% Year 2 Savings $196,133 or 24.1%
- 29. 29© 2013 $0.00 $500,000.00 $1,000,000.00 $1,500,000.00 $2,000,000.00 $2,500,000.00 2010 2011 2012 Fully Insured Self-Funded Mid-Sized Group Example (300 EEs) Year 1 Savings $470,810 or 20.6% Year 2 Savings $242,080 or 10.6%
- 30. 30© 2013 Your Ideal TPA Partner
- 31. 31© 2013 What Are Your Options? National Carrier Claims Administrators
- 32. 32© 2013 What Should You Look For in a TPA Partner? Dedicated to and experienced in self-funded benefit administration In-house medical management team Aggressive cost management programs and services Commitment to performance guarantees Provides high touch service for clients and plan participants Provides analysis, insight and innovative solutions Provides complete data transparency Allows for flexibility and customization
- 34. 34© 2013 Self-Funding With The Right TPA Partner Discretionary Spending • Reserves for health care expenses • Capital expenditures • Other corporate expenses or initiatives
- 36. 36© 2013 Thank You Sponsors! PLATINUM GOLD SILVER DIAMOND