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11106s0513 Edition 05.20.13 The Employer Basics Affordable Care Act The Basics of Self Funding.

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Presentation on theme: "11106s0513 Edition 05.20.13 The Employer Basics Affordable Care Act The Basics of Self Funding."— Presentation transcript:

1 11106s0513 Edition 05.20.13 The Employer Basics Affordable Care Act The Basics of Self Funding

2 Allied National Overland Park, Ks. 2 nd generation family-owned business Founded 1970 Insurance Administrator Our Allied National Culture Innovation Stability Service 2

3 Self funding is the most cost effective way to fund a health plan over the long term. If costs are equal, why wouldn’t you choose a plan that gives you a refund during a healthy year? Why would an employer self fund? Why take the risk? 3

4 Avoids the high costs & rate shocks of fully insured plans under the ACA. No compensation restrictions for agents – not subject to MLR regs. What does the ACA have to do with self funding? 4

5 What does it mean for me? What does it mean for my business? What does it mean for my employee’s health plan? Affordable Care Act 5

6 For the Individual - Employee What does ACA mean for an individual? 1. Individual Mandate says individual must have health insurance or pay a penalty Penalty starts at $95 for 2014 then in 2016 escalates to $695 or 2.5% of taxable income (which ever is greater) 2. Insurance can be employer provided or an individual plan Must be qualifying coverage 3.New health insurance exchanges for 2014 Only way for individual to receive premium subsidy for their coverage 6

7 For Your Business - Employer What you need to know about ACA for your business... … 7

8 Do I have to offer health insurance to my employees? less than 50 more than 50 Based on full-time equivalent employee counts. Part-timers count! 8

9 What type of coverage must I offer? Must offer coverage for all full-time employees and dependents (not spouses) Must offer ACA defined minimum essential coverage (MEC) that meets minimum value Must be affordable for each employee (“affordable” is defined by their income) 9

10 What is “Minimum Essential Coverage?” Must cover a minimum of 60% of expected costs (called a Bronze Plan in the Exchange/Marketplace) Fully insured plans must offer all 10 categories of essential benefits Self-funded plans must only meet the 60% threshold (“minimum value”) Required benefits are determined on a state by state basis and final regulations in each state are still to come 10

11 What are “Minimum Essential Benefits”? 10 defined essential benefits – must be covered without $$ limits Ambulatory patient services Emergency services Hospitalization Maternity and newborn care Mental health and substance abuse Prescription drugs Rehabilitative and habilitative services and devices Lab services Preventive and Wellness Pediatric (including dental and vision) 11

12 What does “affordable” mean? Affordable….. The employer pays enough of the costs so that the employee’s share of the cost for single coverage is not: More than 9.5% of the employee’s W-2 income; or More than 9.5% of employee’s hourly rate of pay * 130 hours; or More than 9.5% of FPL 12

13 What does “affordable” mean? Example The affordability test applies to the employee cost (premium) only. Employee Income $28,735 Maximum Contribution by Employee is 9.5% $2729 ($227/month) 13

14 What happens to our business if we do NOT offer health insurance to our employees? < 50 full-time employees No requirement to offer coverage No penalties >50 full-time employees Penalty if ANY employee goes to exchange and receives a subsidy: Failure to provide Minimum Essential Coverage with minimum value $2,000 per eligible full-time employee after the first 30 Failure to make coverage affordable For each employee who buys coverage on the exchange and receives a premium subsidy the penalty is $3000 14

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16 What happens to our business if we DO offer health insurance to our employees? 1.It must meet minimum essential benefits standards 2.It must be affordable 3.If it’s affordable and meets minimums – NO PENALTIES 16

17 Are there any new additional taxes or penalties under ACA that our business should be aware of? YES Transitional Reinsurance Tax – minimum $63/head beginning in 2014; to be adjusted every year through 2016 as required. PCORI - Research Tax - $1/person/year in 2013; $2; in 2014; then indexed to national expenditures. 17

18 YES….but Plan on paying a consulting fee such as you would your accountant or lawyer. Most agents’ commissions have been greatly reduced or eliminated under the ACA. Will we still be able to have a health insurance broker to help us through this process? 18

19 Insurance Agent vs Healthcare Advisor Skills Health Insurance Agent Pre 2014 Healthcare Advisor Post 2014 Benefit Plan Design XX Marketplace Options – Carriers, Networks XX Price Modeling XX ACA Compliance X Risk Financing (Self Insurance) X Risk Management (Wellness) X Medical Underwriting X Employer Cost Allocation X HIPAA Compliance X ERISA Compliance X Employment Law X Long Term Strategic Planning X Commissions X Fees X

20 Increases Cost Adverse Impact of Affordable Care Act on Fully Insured Employers $ $ Community rating 3:1 age slope rating Pre-ex included Minimum essential coverage Benefit Expansions Guarantee Issue 20

21 Adverse Impact of Affordable Care Act on Fully Insured Employers? Allied “On the Air” Topics ________________________________________ Insurance Market Reforms An explanation of what the reforms are, why they're part of ACA and what the rate impacts will be. Discusses options employers and individuals have to avoid the large fully insured rate increases resulting from the reform. Part 1: Affordable Care Act basics: 4 min. 49 sec. Part 2: Affordable Care Act impacts: 13 min. 30 sec. Part 3: Employer Options: 6 min 17 sec. Part 4: Individual Options: 2 min 39 sec.

22 How can we control the cost of our health insurance as a business? Self Insure Long term, self insuring /self funding is the most cost effective way for an employer to fund their employee health plan – even for smaller employers.

23 Why Would a Small Business Want to be Self Funded? 23 Projected Self Funding Costs

24 Why Self Funding Long Term – it’s the most cost effective way to finance a group health plan Eliminates insurance company profit Eliminates state insurance premium taxes Eliminates state benefit mandates Allows employer to take control of group benefit plan Money not spent on claims belongs to the employer – not the insurance company Avoids many negative impacts of ACA 24

25 Who is self funded now…. Traditional Self Funding 65% >100 72.8M FTEs Small Group Self Funding and Fully Insured 24% >10 and <100 26.8M FTEs Fully Insured 11% <10 12.3M FTEs 100% 111.9M FTEs 11136s0413

26 What is Self Funding? Fully Insured Risk bearer is the insurance company All RISK transfers to insurance company Self Funded Employer is the risk bearer! Claims paid from employers claims fund Employer hires/assigns a claims administrator to pay claims Employer purchases Stop Loss Insurance to limit risk 26

27 Stop Loss Insurance Specific Stop Loss Claims paid by carrier when an individual’s claims exceed a set dollar amount Aggregate Stop Loss Claims paid by carrier when the group’s total claims exceed a set dollar amount Employer’s risk is contained 27

28 How Funding Advantage Works Employer has three monthly costs: Claims Fund Administrative & Sales Costs Stop Loss Coverage 28

29 Self Funded Claim Payment Sample $60,000 Claim 29 Employers Specific Stop Loss Employers Claims Fund Employers Aggregate Stop Loss Employers Specific Stop Loss Limit $2,000 Paid by employee $25,000 Paid from employers claim fund $33,000 Paid by Stop Loss Carrier 29

30 Sample Small Employer Self Funded Program – 55 lives 30

31 Sample Funding Advantage Plan No Refund

32 A new solution for smaller employers! 32

33 Self Funding “on training wheels” 10 or more lives Self funding made “SIMPLE” Prepackaged plan docs, integrated specific and aggregate stop loss policy Level monthly payment plan Terminal liability coverage included No hidden fees No complex contracts What is Funding Advantage? 33

34 34 Experiencing adverse premium impact from ACA Desires lower costs and predictable cash flow Being forced to provide health insurance by ACA Healthy groups Desires greater control and flexibility Needs better claims reporting Promotes health and wellness with employees Who is the ideal candidate 34

35 Self Funded Group Health Plans are subject to “ERISA” regulation. What is ERISA? Employee Retirement Income Security Act 1974 35

36 ERISA enables self funding ERISA pre-empts the state’s ability to: Mandate health insurance contract terms and benefits Impose premium taxes Impose underwriting constraints and mandated premiums Limit employee benefit plan options 36

37 Role of Allied as the Self Funded Plan Administrator 37 Assist with plan design Manage Stop Loss claims Assist with plan communications Provide network access Claims payment Large claims management Manage claim cost containment vendors Reporting and compliance services 37

38 Allied National’s Unique Underwriting Philosophy 38 Traditional Underwriting TODAY Allied National Underwriting Price based on past health history, experience, industry trends, and industry loads Price based on future health care costs Past history Future costs

39 Self Funding Sample Case Study 39 85 Employees $6.5M Sales - pretax profit 12% Renewal Premium $612,000 Self Funded Program $610,000 Employer’s Loss Fund $366,000 Projected Refund 20% ($73,200) Net Cost $536,800 Refund = 9.3% of profit 39

40 Why Would a Small Business Want to be Self Funded? 40 Projected Self Funding Costs

41 11149s0513 This sample chart illustration is provided for educational purposes only. Actual results may vary and are not indicative of future performance. Allied National, Inc. l 4551 W. 107th St. Suite 100 l Overland Park, KS 66207 l 888-767-7133 l l l Why Would a Small Business Want to be Self Funded? $600 $500 $400 $300 “Employee Only” Rate 201420152016201720182013 Year “Employee Only” Rate Illustration $700 Self Funded 2014-2015 ObamaCare Rate Shocks Potential Refunds Fully Insured

42 Funding Advantage vs Fully Insured 55 lives (for illustrative purposes only) Year Funding Advantage ACA Compliant Fully Insured ACA Compliant Difference 2013$305,412 $0 2014$335,953$427,577($91,624) 2015$369,549$534,471($164,922) 2016$406,503$598,608($192,104) 2017$447,154$670,440($223,287) Total$1,864,571$2,536,508($671,937) Claim Refunds (15%) ($279,686)$0($279,686) Net Cost$1,584,885$2,536,508$951,623 Increased Cost60.04% 42

43 Next Steps 43 1.Agent contacts Allied 2.Current census 3.Plan design & benefits 4.Current and renewal billing

44 Sales UnderwritingInstallation Service SuspectAppointment Conceptual Presentation Data CollectionStreet QuoteEnrollmentUnderwriting Reviews Allied Offer of Final Rates Final Proposal to Client ClosePlan Docs IssuedServicesClaimsReportsRenewal 10991s0812 Life Cycle of a Funding Advantage Client start Allied National, Inc. l 4551 W. 107 th St. Suite 100 l Overland Park, KS l 888-767-7133 l l l

45 WARNING! Projected market capacity bottleneck. 4 th Quarter 2014 DON’T WAIT! 45

46 In the works with Allied National! Unique small group self funded product for the low wage employee 3 rd Quarter 2013 46

47 Thank you! For more information: Allied Sales Support 888-767-7133 Fax: 913-945-4396 Allied National, Inc. 4551 W. 107 th St. #100 Overland Park, KS 66207 This is an invitation to inquire about the Allied Funding Advantage plan. This is a limited description of the plans. See plan brochure and plan documents for complete details. 47

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