health care reform and self-funding webinar - IBP Insurance Services


Jan 1, 2014 - Kaiser studies show the percent of small employers self-funding has increased 22% since 2010. “Self-funding seemed like a reasonable f...

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HEALTH CARE REFORM AND SELF-FUNDING Web meeting call in number: 866-431-5314 Passcode: 729405

John Carlson Director Health Care Reform Lauren Stoddard Self-Funding Product Manager

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AGENDA

 2014 Upcoming Health Care Reform Changes – Community Rating – Essential Health Benefits – Fees and Taxes

 Flexibility in Self-Funding – Self Funding Basics – Stop Loss – Cigna’s Product Solutions

 Cigna’s Level Funding – Level Funding Overview – Dental Self Funding

 Wrap up and Q&A

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KEY HEALTH CARE REFORM PROVISIONS BY FUNDING TYPE This chart summarizes the ongoing provisions and changes coming in 2013 and 2014 that may affect employer health plans. Currently, states can define small group as 1 to 50 or 1 to 100 employees. Beginning in 2016, small group will be defined as 1 to 100 in all states. Market Impact

PROVISION

Large Group

Funding Impact

Small Group

Insured

      

      

Self-Funded

Does not apply to grandfathered plans

2014 Modified Community Rating Essential Health Benefits (EHBs)

Reinsurance Assessment Health Insurance Industry Fee Comparative Effectiveness Research Fee (CERF) Cost Sharing Limits – Out-of-Pocket Maximums

Cost Sharing Limits – Deductibles

   

  

 

 

For more information, check out our interactive Health Care Reform Timeline on InformedOnReform.com.

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PPACA FACTS – MODIFIED COMMUNITY RATING CHANGES

In 2014, PPACA implements rules around community rating that impacts fully insured small employer groups – now defined as under 50 employee size groups, but will apply to under 100 size groups in 2016. PPACA allows the following rating factors:  Family Size  Geographic area  Age  Tobacco use – rates will be 150% greater than non-Tobacco rates PPACA does not allow the following rating factors:  Rating based on health status or condition.  Age rating, meaning a carrier can’t charge the oldest member more than 3x than what it charges a younger employee

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ESSENTIAL HEALTH BENEFITS – 10 BASIC CATEGORIES

Challenge of Balancing Comprehensiveness and Affordability  Ambulatory patient services

 Emergency services

 Rehabilitative and habilitative services/devices

 Hospitalization

 Laboratory services

 Mental health and substance abuse disorders/behavioral health treatment

 Preventive and wellness services and chronic disease management

 Maternity and newborn care

 Pediatric services, including oral and vision care

 Prescription drugs

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ESSENTIAL HEALTH BENEFITS – WHAT WE KNOW

 Effective for plans beginning on or after 1/1/14  Each state determines EHBs by selecting a benchmark plan

Plan/Funding Type

Individual and Fully Insured Small Group

Fully Insured Large Group ASO Small Group and Large Group

Grand-father Status

Must Cover Essential Health Benefits

Defines EHB

Annual Or Lifetime $ Limits On EHB Permitted

Non-GF

Yes

State

No

GF

No

State

No

Non-GF

No

State

No

GF

No

State

No

Non-GF

No

Client

No

GF

No

Client

No

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NEW FEES AND TAXES – EMPLOYERS AND INSURERS

Comparative Effectiveness Research Fee

Health Insurance Industry Fee

Reinsurance Assessment

Overview

• Annual fee on insured and self-insured plans beginning on/after 10/2/11 • HRA/FSA nuances • FI: Cigna pays, built into premium rates • ASO: Client must calculate and pay own fee

• Annual fee on all insured plans • Includes Dental/Vision • Excludes ASO and stop-loss • Full amount built into rates for plans 1/1/14+ • Partial load for plans effective in 2013 based on portion of premium earned in 2014

• Annual per capita fee on insured and self-insured plans • Excludes Dental/Vision • FI: Full amount built into rates for 1/1/14+; partial load in 2013 • ASO: Client is liable. Client chooses if they submit payment or have TPA submit it on their behalf

Effective

• Plan years beginning on or after 10/2/2011 • First payable for many plans 7/31/13

2014 • First payment due 9/30/14

2014-2016 • Cigna will make first payment January, 2014

Cost Impact

• Annual fee of $1, then $2 indexed, per participant until 2019

• 2 - 2.5% of premium in 2014 • Increasing to 3 - 4% in future years • Tax-deductible for employers as part of premium

• • • •

Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2013 Cigna

$63 PMPY in 2014 $40 - $60 PMPY in 2015 $25 - $35 PMPY in 2016 Tax-deductible

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NEW FEES AND TAXES – EMPLOYER ONLY

Employer Mandate

“Cadillac” Tax

Overview

• Fines employers with 50+ full-time equivalent employees who do not provide affordable (costs less than 9.5% of employee’s W-2 wages), “minimum value” (covers 60%+ of costs) coverage Penalties: • No coverage: $2,000 per FTE (minus first 30) • Not affordable and/or not minimum value: Lesser of $3,000 per FTE receiving tax credit or $2,000 per FTE (minus first 30)

• Imposes an additional excise tax on plans with generous coverage levels • A 40% excise tax on high cost health plans that exceed $10,200 for individual and $27,500 for family coverage

Effective

2015

2018

Cost Impact

• Depends if employer needs to adjust plan to be compliant or is penalized

• Actual impact TBD based on final regulatory guidance

Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2013 Cigna

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EMPLOYER CONSIDERATION

STRATEGY  Company culture, philosophy and core values?  Company’s role in providing and financing health care benefits?  Benefits key to attracting, retaining and engaging employees?

PROGRAM DESIGN

COMMUNICATION

 What are your goals for 2014 vs. 2015 – 2017?  Are you on target to be compliant in 2015 with “affordability” and “minimum value”  How many “new” employees will purchase health care?

 Is your firm prepared for the changing marketplace dynamics?  How to best engage employees and their families?

Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2013 Cigna

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Involvement with financing

CONSIDER THE OPTIONS

Stay the course

Full throttle on health, wellness and productivity

Opt Out

Defined contribution approach

Involvement with benefits, health and productivity

Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2013 Cigna

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EMPLOYERS ARE LOOKING FOR MORE FLEXIBILITY AND CHOICES

The momentum is building In 2012, 55% of new clients chose a Cigna self-funded plan in 2012.

YTD 2013, 81% of new clients chose a Cigna self-funded plan Kaiser studies show the percent of small employers self-funding has increased 22% since 2010.

35% in 2010

“Self-funding seemed like a reasonable fit to me, after I put the dollars and cents to it. A string of three good years and you’re ahead of the game. From my experience, it’s worth the risk. I’m comfortable with it.” Steve Smith, President, CornerStone Staffing

55% in 2012

“We really felt we had an actionable strategy to continue to offer health care coverage – something that no-one else could give us.” Barb Eaton, Citywide Banks HR Director

“Over the long term, our Cigna health benefits plan and focus on a healthy lifestyle have definitely been successful. We’re a growing company and it’s a great match.” Andrew Skipton, CFO, Logos Bible Software

* Employ er Health Benefits 2012 Annual Survey, The Kaiser Family Foundation and Health Research & Educational Trust

Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2013 Cigna

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SHOULD I SELF FUND?

 Was your medical renewal this year higher than expected?  Was the financial calculation of your renewal backed up with your company's own claim experience and utilization data?  Did you receive reports to illustrate how your company’s health care dollars are being spent?

 Do you have the ability to design a benefit plan that suits your company’s and employees’ needs?  Are you receiving money back from your current plan when claims run lower than expected?

 Are you willing to become more engaged in order to have more impact on your health care costs (Utilization Reports and Health Improvement Strategies)?  Are you looking for options around the fees and taxes that PPACA will implement?

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HOW SELF-FUNDING WORKS

 Employer designs the medical plan with help from the broker/consultant and/or the health insurance company or Third Party Administrator. Federal mandates apply.

 The health insurance company or a Third Party Administrator is usually engaged to administer the plan.

 A Summary Plan Description/ASO Agreement is prepared.  Employer pays for claims, usually through a dedicated bank account administered by the health insurance company or Third Party Administrator.

 Stop-Loss insurance is purchased to cap employer plan liability for large individual claims and total group utilization

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WHY STOP-LOSS?

 Individuals with serious diagnoses can accumulate claims in the range of $15,000 to over $1 million in a 12 month period.  Advances in treatment practices, technology & pharmacology are impressive, but so too are the costs: ̶ 1 in 8 babies are born prematurely: $100,000 - $1,000,000 or more. ̶ Transplant: $500,000 or more. ̶ New forms of cancer treatments and medications for immune disorders and hemophilia: can run in excess of $40,000 per month.  Common High Dollar Claims: heart conditions, cancer, premature infants, hemophilia, multiple traumas, kidney or liver disease, severe burns, medications Even one high claimant can have a dramatic impact!

Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2013 Cigna

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STOP-LOSS OVERVIEW: INDIVIDUAL & AGGREGATE

Throughout the year, a plan experiences claim fluctuation due to unexpected serious illness or accident; additionally, a shift in overall utilization can impact cash flow.  Stop-Loss limits employer’s liability for unexpected claims: – Limits liability to a pre-determined amount for each covered individual on the plan, per policy year (Individual Stop-Loss). – Limits overall claim liability per policy year (Aggregate Stop-Loss).  Enables employers of all sizes to enjoy the benefits of self-funding while limiting the associated risk.  Employers gain peace of mind knowing their maximum liability ahead of time and financial protection from limited impact because of unexpected fluctuations in claims.

 Premium paid to Stop-Loss carrier to provide protection; premium adjusts based upon the level of protection client chooses.

Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2013 Cigna

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FUNDING ARRANGEMENT COMPARISON

Value of mandated benefits

Claim corridor

Expected Claims

Expected Claims

Reserves/run-out claims

Reserves/run-out claims

Fixed costs paid to insurer

Fixed costs paid to insurer

Fully insured

Self-funding with stop loss

Participating

Non-Participating

Non-Participating

Note: This comparison is intended to demonstrate key concepts across the funding options and is not intended to reflect all technical pricing differences. Reserves are typically held by employer. Fix ed costs include taxes. Taxes for self-funding are only applied to Stop-Loss premium; taxes for fully insured are applied to entire premium.

Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2013 Cigna

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ILLUSTRATING SELF-FUNDING

CASE STUDY What is the correct comparison between a fully insured premium and self-funded expected and maximum liability?

1. Self-funding should have lower EXPECTED costs due to removal of state mandated benefits and lower-premium taxes. 2. Self-funding should have a higher MAXIMUM liability as the plan sponsor is responsible for unexpected claim level.

Annual Costs

SelfFunded

Admin

$90,000

ISL Premium

$216,000

ASL Premium

$24,000

Expected Claims

$480,000

Expected Costs

$810,000

Claims Corridor (15%)

$120,000

Maximum Liability

$930,000

Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2013 Cigna

Fully Insured

$875,000

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LOWEST RATES VS. LOWEST COST: THE TOTAL EQUATION FOR A LONG-TERM SOLUTION

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You always get guaranteed rates, but what about:  Money back when claims run well.  Product bundling discounts and claim reductions.  Client-specific claim/utilization information that allows data-driven decision making.  Educated product, service, and health improvement consultants.

 Potential ROI of Health Improvement Initiatives (where YOU get to keep the savings).

 Customer satisfaction: • 24/7 Customer Service

• MyPersonalChampion

®

 Administrative savings: identical plan designs offered to all U.S. employees.  Doctor/Hospital relationships that promote outcomes, satisfaction, and cost.

Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2013 Cigna

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HOW DOES LEVEL FUNDING SM WORK?  Level FundingSM allows clients to participate in their claim experience  Client pays preset level payments (maximum costs) each month

 Client and broker can view monthly claims reporting and assess expected surplus throughout the year

 In month 15, the claims funding surplus and amount to fund claims after termination – called  Regardless of claim activity from month to month, terminal funds- are assessed. Terminal fund client costs do not fluctuate covers run-out claims; no additional fees due) (except to adjust for enrollment shifts)  In month 16, the client receives their portion* of the claims funding surplus Total costs

$ Thousands $35

Terminal fund

30 25 20

Monthly claims funding (MCF)

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Administrative and insurance (fixed) costs (A&I)

10 5 0 Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

15 month run-out

*Surplus share arrangements vary and may be impacted by state regulations. Includes ⅔ option, ½ option, and 100% option. Surplus is giv en as an administrative fee credit.

Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2013 Cigna

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CIGNA LEVEL FUNDING DELIVERS SAVINGS AND PROTECTION

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How are your Level Funding plan costs determined?  Costs are based on census/demographics, plan design, and claim experience (if applicable) or individual health questionnaires (if applicable).  Costs are broken into preset monthly payments, making it easy to budget. What happens when you have a good claims year?  Year-end reconciliation is done, and surplus is determined.  You get ⅔ of that surplus back, offsetting future plan costs!* (50/50 available).

What happens when you have a bad claims year?  No additional payment is due.  No deficits are carried forward into future years. Our success speaks for itself. Two out of three self-funding Cigna clients were in a surplus cash flow position at the plan year end and have money left to use for future health costs. 3 *Surplus is returned as administrative fee credit. Credit is applied fourth month after renew al. If y our policy is terminated, the credit is forfeited.

Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2013 Cigna

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CIGNA PRODUCT ADVANTAGES Cigna Level and Graded Funding  Stop loss protection from high claims  Immediate reimbursement from the stop loss policy for higher claims.

design flexibility, HIPAA certification)  Cigna National provider network with competitive network discounts

 15 months of run-out protection that includes Specific Stop-loss  Fewer “add” on costs for other items (plan Level Funding SM contract provisions

Graded FundingSM contract provisions

 No separate stop loss limits for ongoing high dollar claimants

 No separate stop loss limits for ongoing high dollar claimants (lasering)

 No additional costs after termination, and deficits are not recovered in future years

 Cigna helps pre-set the funds needed to pay run-out claims

 Does not require minimum claim liability amount if enrollment decreases during the year

 Option to apply minimum claim liability and deficit recovery provisions for additional cost savings.

 Move Graded Funding when you are ready

 Move to Level Funding if you need to

Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2013 Cigna

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INTRODUCING SELF-FUNDING FOR DENTAL - 12/1/2013 Love that Cigna offers so many funding solutions for Medical plans? Now Cigna Dental plans have the same funding solutions.  We now offer two self-funding solutions, in addition to fully-insured.  Our robust Dental PPO plan designs are available across all funding solutions  Cigna is only carrier offering innovative self-funding solutions to smaller employers for both Medical and Dental plans 1

Innovative Self-Funding Solutions: Level Funding SM- Know what you owe, with fixed monthly payments and no cost at termination

Graded FundingSM - Pay as you go, with costs based on actual claims with stop-loss

insurance limits

• Dental and medical claims are combined into one overall claim liability which is protected by a single aggregate stop loss threshold!

• Ability to migrate between Level and Graded

1. Cigna offers group health insurance coverage to employers with 51–250 employees, as well as administrative services for self-funded plans. In most states, Cigna administers selffunded plans to employ ers with as few as 25 employees. In North Carolina, Cigna administers self-funded plans only for employers with more than 25 employees. In New Hampshire, New York, Oregon and Utah, Cigna administers self-funded plans only for employers with more than 50 employees. Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2013 Cigna

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CIGNA DENTAL Better funding.

$

Funding solutions that meet your needs

Only carrier to offer innovative Dental and Medical self-funding solutions to smaller employers1 Up to 1% dental bundling credit on medical for fullyinsured and self-funded clients2

Better savings. Easy and cost-effective access to care

Better health. Whole-person integrated health focus

Largest national discounted Dental PPO3

Innovator in integration programs

Net effective discounts savings expected to exceed industry average in 20144

Interactive support Wellness benefit plans and ongoing education

Largest DHMO network5

Better experience. Revolutionized customer experience

24/7 live customer service Innovative myCigna.com with oral health assessment6 Find a dentist, check coverage and view ID card information on the go with Cigna mobile

1. Based on 2013 Cigna Internal Analy sis. Cigna offers group health insurance coverage to employers with 51–250 employees, as well as administrative services for self-funded plans. In most states, Cigna administers self-funded plans to employ ers with as few as 25 employees. In North Carolina, Cigna administers self-funded plans only for employers with more than 25 employees. In New Hampshire, New York, Oregon and Utah, Cigna administers self-funded plans only for employers with more than 50 employees. 2. 1% medical underwriting decrement is applicable with the purchase of Cigna’s WellAware chronic condition management program. A medical underwriting decrement of .5% is applied without purchase of Cigna’s WellAw are program. 3. NetMinder. DPPO data as of March 2013, including combined reported Cigna Dental Radius Netw ork® and Dental Netw ork Savings Program counts of unique dentists. Data is subject to change. The Ignition Group makes no w arranty regarding the performance of the data and the results that w ill be obtained by using. 4. 2014 industry projection based on actual 2011 Ruark Discount Study national industry results projected to 2014. Cigna projects to have higher net effectiv e discounts that the industry average based on industry projection for 2014 assuming an average 2% effectiv e discount industry growth, based on historical industry trends, and an av erage 4% effectiv e discount Cigna DPPO growth from 2011-2014. 5. NetMinder. DHMO data as of March 2013 and is subject to change. The Ignition Group makes no warranty regarding the perform ance of the data and the results that w ill be obtained by using. 6. Top Technology Innovation, InformationWeek 500, September 2012.

Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2013 Cigna

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CIGNA’S MULTI-YEAR STRATEGY IS BUILT TO GROW WITH YOUR BUSINESS

Today

Year 1-2

Year 3+

Fully insured

Cigna Level Funding

Cigna Graded Funding

 Fixed Premiums

 Pre-set monthly costs

 Non-participating

 Participating (partial)

 Little to no transparency into claim utilization

 Full transparency into claim utilization

 Limited opportunity to benefit from health improvement initiatives

 Health improvement strategy resources and the opportunity to see financial benefit from these initiatives

 Faced with HCR decisions due to “small group” definition changes

 Ability to follow “large group” definition under PPACA guidelines (retain plan flexibility, are not subject to the same taxes and fees)

 Ability to self-fund your dental and vision plans

Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2013 Cigna

 Fluctuating monthly costs with capped liability

 Fully participating  Full transparency into claim utilization  Health improvement strategy resources and the best opportunity to see year over year financial benefit from these initiatives  Ability to follow “large group” definition under PPACA guidelines (retain plan flexibility, are not subject to the same taxes and fees)

 Ability to self-fund your dental and vision plans

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NEXT STEPS AND QUESTIONS InformedOnReform.com  Advocacy papers  News alerts

 Provision timeline  Webinar series

Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2013 Cigna

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"Cigna," the “Tree of Life” logo and “GO YOU” are registered service marks of Cigna Intellectual Property, Inc., licensed for use by Cigna Corporation and its operating subsidiaries. All products and services are provided by or through such operating subsidiaries and not by Cigna Corporation. Such operating subsidiaries include Connecticut General Life Insurance Company, Cigna Health and Life Insurance Company, and HMO or service company subsidiaries of Cigna Health Corporation and Cigna Dental Health, Inc. 865152 10/13

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