1. BENEFITS AND RISKS OF BEING SELF-INSURED LINCOLN COUNTY COMMISSIONER ROB COFFMAN

2. AGENDA  Understanding Health Plan Self-Funding  Advantages and Disadvantages of Self-Funding  Individual v. Joint (Multi-Employer) Plans  Healthcare Environment Post – ACA  Questions?

3.  Self-Funding treats predictable claim cost as expenses rather than insurable risk.  Under a Self-Funded plan model an employer determines the amount of risk appropriate for their organization.  Employers purchase Stop Loss Insurance to protect against unknown and unpredictable catastrophic claims.  Self-Funded plans are governed by Federal ERISA instead of State insurance laws.  Governmental agencies like counties and municipals, however, are also subject to rules from the State Risk Manager’s Office (RCW 48.62.011) SELF-INSURING HEALTH PLANS Understanding Self-Funding

4. Purpose:  To provide financial protection to a Self-Funded plan sponsor  Provides protection against a catastrophic event or from abnormally high frequency/severity  Severe high dollar claims such as cancer, transplants and dialysis are considered “shock loss” claims  The Stop Loss contract insures the Employer not the Employee  The medical plan established by the Employer accepts the responsibility for paying providers claims but limits it’s risk with Stop Loss SELF-INSURING HEALTH PLANS What is Stop Loss Insurance

5. Advantages & Disadvantages of Self-Funded Health Plans  Requires long-term commitment  More internal administration  More involvement in plan design decisions  Must contract for claims, other services  PPO discounts may be less than insurers'  Increased fiduciary liability  Variable financial risk  Still subject to ever increasing cost of healthcare claims (no magic bullet)  Limits the number of experienced consulting brokers available  Not subject to premium taxes  Not subject to state benefit mandates  No insurer profit margin built into rates  No broker commissions on full plan  Pay only for desired services  Greater control over plan design  Employer maintains claims reserves  Access to claims data  Full Credit for wellness savings  Independent claims and disease management  TPAs offer more services than insurers

6. Risk Management – Charges, Commissions and Retentions  A Self-Funded health plan can allocate more of each dollar toward payment of medical claims through eliminating commissions, risk charges and insurer profit. Improved Cash Flow  Fully insured premiums are a form of pre-payment  Self-Funded plans pay as you go Innovative Plan Document Design and Control  Freedom from state mandated benefit laws allows for flexibility in plan design  Benefits can be tailored to the working population SELF-INSURING HEALTH PLANS Weighing the Benefits

7. Plan Sponsor’s Experience  Employer is responsible only for the risks presented by members of the plan Risk Control  Stop Loss coverage can limit the employers risk while allowing it to retain control over claims and benefits Value-Based Benefits and Wellness Programs  Flexibility to design health risk assessment & prevention and wellness tailored to the groups demographics Improved Claims Data History  Software and investigative techniques can help curtail spending Savings Opportunities  Utilization of cost containment features increases savings opportunities SELF-INSURING HEALTH PLANS Weighing the Benefits

8. Chapter 48.62 RCW provides authority for local governments to individually or jointly self-insure health care, accident, disability, death, and salary protection benefits. RCW 48.62.011 requires prior approval for the establishment of every individual and joint local government self-insured employee health and welfare benefit program. RCW 48.62.071 requires that specific information is submitted to the state risk manager for program approval. SELF-INSURING HEALTH PLANS Self-Funding for Washington Counties

9. Individual (Single-Employer) Self-Funding  Must hold 8 weeks of total expected plan expenses in reserve  Report annually to State – Report Form is located on the Local Government Self-Insurance Program website  Aggregate Stop-Loss recommended Joint (Multi-Employer)  Must hold 16 weeks of total expected plan expenses in reserve  Must also submit, as part of the Annual Report, prepared financial statement  In addition, audited financial statements must be provided to the State Risk Manager  Aggregate Stop-Loss required SELF-INSURING HEALTH PLANS Individual v. Joint (Multi-Employer) Plans

10.  According to Pricewaterhouse Coopers data, the percentage of Self- Insured employers with fewer than 1,000 people in their health plan programs has almost doubled – from 29% in 2008 to 48% in 2010  According to 2011 Kaiser/HRET survey of Employer/Sponsored Health Benefits, 60% of companies Self-Insure their health benefit programs, up from 49% in 2000  DOL Confirmed Staggering Savings under Self-Funding  Deloitte Advanced Analytical Consulting Group was quoted in a recent Department of Labor (DOL) report that fully insured premiums increased by $808 while self-funding only increased by $248, a difference of 326% in 2011 SELF-INSURING HEALTH PLANS Changing Landscape of Self-Funding

11. Accountable Care Act  Health care reform was enacted March 23, 2010  Self-Insured plans are exempted from some ACA reforms that apply specifically to insurers such as medical loss ratio (MLR) standards, rating restriction rules, and insurer fees  ACA provisions specifically applicable to “small employers” range from: fewer than 26 employees for tax credit eligibility to 100 employees or less to qualify for exchanges  Self-Funded is cost effective at a time when traditional insurance is predicted to become more costly due to ACA. SELF-INSURING HEALTH PLANS Current Healthcare Environment

12. 1. State health insurance exchanges established 2. Medicaid eligibility expands 3. Large employers (50+ employees) must provide health plan or pay a fine 4. Individuals must secure health coverage or pay penalty tax 5. Automatic enrollment of full-time employees in an employer’s health plan required (200+ employees) 6. No pre-existing condition exclusion allowed 7. Waiting period limited to 90 days 8. Cost-sharing amounts capped and annual limits removed 9. Maximum health premium discount for wellness program participation increased from 20-30% 10. Group health plan must report coverage by individual to IRS 11. Self-Insured plans will have to maintain certain levels of coverage in order to meet the threshold of a qualified health plan 12. Non-discrimination rules will apply to fully-insured plans SELF-INSURING HEALTH PLANS 2014 What to Expect

13. SELF-INSURING HEALTH PLANS Questions? Rob Coffman County Commissioner Lincoln County 509-725-3031 rcoffman@co.lincoln.wa.us Dan Fisher, CEO EmSpring 877-550-0088 dan.fisher@emspring.com