2016 Presentation to the Benefits Committee of the TSA Texas Sign Association on the concept of self-insured group medical stop loss captive for employee health insurance.

2. Health Insurance
Options
Financing Group Medical Benefits

3. Lou Polur

5. Options for Paying for Health Plans
 Fully insured plan
 Self-funded plan
 Group medical benefits captive

6. Fully Insured
 Significant rate increases with little or no data
 Are you subsidizing the insurance company’s other policy holders?
 Buying decisions not linked to your company’s costs
 Conrol costs
 Change carriers
 Change benefits offered
 Change contributions
https://www.iscebs.org/Symposium/Documents/2016Sessions/Wednesday/
14C_Employee_Benefit_Group_Captives.pdf

8. Lou Polur’s 2016 Family Health Care
Experience
 2016 Premiums $15,000
 2016 Family Deductible $12,000
 2016 Family Medical Out of Pocket $4,500
 “Profit to Carrier” from Polur family: $15,000

9. ACA: Regulation on Insurance and
Health Care Industry
 Cadillac plan taxes
 Medical devices
 Prescription drugs
 Coverage mandates

10. Would you like to take control back from
Big Insurance Companies and ACA?

11. Employers can self fund their health plans
 The employer can customize the plan to meet the specific health care needs
of its workforce, as opposed to purchasing a 'one-size-fits-all' insurance policy.
 The employer maintains control over the health plan reserves, enabling
maximization of interest income - income that would be otherwise generated
by an insurance carrier through the investment of premium dollars.
 The employer does not have to pre-pay for coverage, thereby providing for
improved cash flow.
http://www.siia.org/i4a/pages/Index.cfm?pageID=4546 Self
Insurance Institute of America website

12. Employers can self fund their health plans
 The employer is not subject to conflicting state health insurance
regulations/benefit mandates, as self-insured health plans are regulated
under federal law (ERISA).
 The employer is not subject to state health insurance premium taxes, which
are generally 2-3 percent of the premium's dollar value.
 The employer is free to contract with the providers or provider network best
suited to meet the health care needs of its employees.
http://www.siia.org/i4a/pages/Index.cfm?pageID=4546 Self Insurance
Institute of America website

13. Paying for Insurance, by Industry

14. Who Are Good Candidates?
 Eligible companies with 25-750 eligible employees
 Forward thinking management teams and owners
 Good communication with employees on health care costs
 Willingness to implement robust health and wellness programs
 Financially stable and willing to take on some portion of the health plan risk

15. Self-funded Plans’ Advantages
Traditional
 Cash flow advantages
 Data transparency
 Plan design flexibility
 Ease of administration
 Lower fixed costs
 Exemption from premium taxes
 Retain the carrier’s profit
Under ACA
 Not required to provided coverage
with minimum essential benefits
 Not required to participate in a
risk-adjustment system
 Not subject to insurance company
provisions such as medical loss
ratio requirements
 Premiums driven by plan
experience
https://www.iscebs.org/Symposium/Documents/2016Sessions/Wednesday/14C_
Employee_Benefit_Group_Captives.pdf

16. Considerations to Self-funding
 Long-term focus
 Retaining risk
 Data overload
 Volatility and lasering
 Resources to manage
health care risk programs
https://www.iscebs.org/Symposium/Documents/2016Sessions/Wednesday/14C_E
mployee_Benefit_Group_Captives.pdf

18. Self-funded: Medical Stop Loss Insurance
to Control Risk
 Covers catastrophic or unpredictable losses
 Protects the self-funding employer’s assets
 Individual/Specific stop loss
 Protects against high claims from any one individual
 Protects against the severity of a single catastrophic claim
 Aggregate stop loss
 Provides a ceiling for overall claims liability
 Protects against higher-than-expected usage or frequency of claims from the entire
group
https://www.iscebs.org/Symposium/Documents/2016Sessions/Wednesday/14C_E
mployee_Benefit_Group_Captives.pdf

19. How does an Association help members
control medical insurance costs?

20. Group Medical Stop-loss Captive
https://www.iscebs.org/Symposium/Documents/2016Sessions/Wednesday/14C_E
mployee_Benefit_Group_Captives.pdf

21. Group medical stop-loss essentials
 Each employer that participates maintains its own self-funded health benefits
plan separate from that of the other member employers.
 The employer can dictate its own plan rules, including levels of coverage such
as copays and deductibles, provided they comply with federal laws governing
self-funded employee benefit plans.
https://www.businessinsurance.com/article/20130310/NEWS05/303109989

22. Stop loss policy structure
https://www.iscebs.org/Symposium/Documents/2016Sessions/Wednesday/
14C_Employee_Benefit_Group_Captives.pdf

23. Group medical stop-loss essentials
 The stop-loss insurance program is purchased from a medical excess insurer
that issues a separate policy to each captive member.
 The stop-loss policy has a specific deductible, which applies to each plan
participant; and an aggregate attachment point, which applies when the total
amount of a single employer's health benefit plan's claims reaches a certain
level, 125% of expected claims, for example.
https://www.businessinsurance.com/article/20130310/NEWS05/303109989

24. Captives offer
Predictability and Probability
https://www.iscebs.org/Symposium/Documents/2016Sessions/Wednesday/14C_E
mployee_Benefit_Group_Captives.pdf

25. Captive for the Self-funded Group
Medical Benefits
 The captive enters into a reinsurance agreement with the medical stop-loss
insurer The reinsurance agreement also limits the total amount of claims the
captive is responsible for paying.
 To fund this layer of risk, the stop-loss insurance carrier pays a portion of the
stop-loss premium collected by each captive member to the captive. Under
this arrangement, the captive is only acting as a reinsurer.
 The stop-loss insurer is said to be “fronting” the captive, issuing policies in its
name.
https://www.businessinsurance.com/article/20130310/NEWS05/303109989

26. Risk Layers in Captive
https://www.iscebs.org/Symposium/Documents/2016Sessions/Wednesday/14C_E
mployee_Benefit_Group_Captives.pdf

27. Keys to Success
 Critical mass- 1000+ covered employees over first twelve months
 Clear understanding of role and benefit of a captive
 Wellness and disease management programs
 Commitment from a cohesive group
 Internal advocates and champions
 Involvement beyond HR
 Excellent internal communication
 Alignment of interests among participating companies
 Transparency
 Adequate and well structured excess/aggregate protection in stop loss
contract
SRS presentation on medical stop loss group captive

28. Case study example
 Formed in 2012
 Fronted A+ carrier for the medical stop loss coverage
 2016 Membership includes eleven groups, covering over 6,000 lives from size
104 employees to over 550 employees
 Annual trend increase in medical costs has been less than 4.5%
 Program has produced profits each year; $2 million in cumulative captive
dividends have been distributed to participants since 2012
SRS presentation on medical stop loss group captive

29. Employer groups are invited
 Captive membership is by invitation
 Employer groups are each medically underwritten
 Joining the captive is a transparent and group decision

31. Questions?
 How to move forward?
 1,000, 1,200, 1,500 employees
 20, 25, 30 or more companies
 3 to 5 year commitment to participate