Using Group Captives to Manage Medical Stop-Loss

Transcription

1

2 Using Group Captives to Manage Medical Stop-Loss Andrew Cavenagh, Managing Director Pareto Captive Services Jim Hoitt, Vice President Berkley Accident & Health Jim Knutson, Risk Manager Aircraft Gear Corp. Moderator Mike Ferguson, CEO Self-Insurance Institute of America, Inc.

3 Traditional Self-Funded Plans Unlimited Single Employer View of Funding Stop-Loss Insurance Specific Excess Policy Pays claims > $100K per claimant Per Claimant $150K Stop Loss Self-Insured Retention Employer Claim Fund ER retains claim risk on a per claimant and aggregate basis Stop-Loss Insurance Aggregate Policy ER may hold funds in General Assets until claims need to be paid Aggregate Claims

4 Medical Stop Loss Captive Program Single Employer View of Funding Per Claimant Unlimited $250K Stop Loss $25K Stop Loss Stop-Loss Insurance Specific Policy Group Captive Members share claim risk in a pool on a per claimant and aggregate basis between $25,001 and $250,000 Self-insured Retention Employer Claim Fund Stop-Loss Insurance Aggregate Policy Aggregate Claims

5 Medical Stop Loss Captive Program Multi Employer View of Funding Transfer (Excess) Share (Captive) A B C D E F G H I J Each employer pays its own claims within its self-funded plan

6 Comparing Models Fully Insured Funding Model Capital Capital from investors expecting a ROI Group Captive Program Funding Model Capital / Collateral Insurance Company Administration Costs Capital from owners/insureds Plan & Program Administration Costs Reinsurance Costs Premium Captive Claim Reserve Insurance Company Claim Reserve Premium Employer Claim Reserve Unused reserves retained by Employer and Captive

7 Value Proposition for Employer Finally, a long term strategy for health financing costs Transparency Turn the lights on claims, utilization, trends Your data = your premium Data shows cost drivers Costs always follow risks What are the risks? Diabetes, asthma, Data driven wellness strategies to promote health and reduce future claims Reduce plan administrative costs Fees, risk charges, administration costs State mandated benefits Unused claim reserves retained by member Mitigate ACA implications

8 Value Proposition Bundled Fully Insured Selected by insurance carrier Stock plan designs Physician/Provider & Hospital network Pharmacy/Rx management Disease/Case management May include wellness Premium Billing and Claims payment Costs: Insurance company premium Group Captive Precision Selected Controlled and Selected by Clients Custom plan designs Custom Physician/Provider & Hospital network Separate Pharmacy/Rx management Separate Disease/Case management Advanced wellness - health management Billing and Claims payment Costs: Claims + Excess Insurance + Administration

9 Quick Notes About the Plans Each member has their own plan and policy Each member has their own rate based upon risk profile and claim experience Risk sharing only on large claims in the captive layer not the Plan layer Group decisions related to: o o o Renewal / Service Providers Wellness and Health Management Plan Designs & Options

10 How Does The Group Captive Program Work? Each Employer: Adopts its own Self-Funded health plan Remains fiduciary of its own health plan Pays all claims within its self-funded retention Buys stop-loss insurance (premiums) - both specific and aggregate claim protection Posts collateral to group captive

11 Value Proposition Captive Manager New / Emerging market segment Complimentary value proposition to P&C captive industry Ability to apply proven P&C philosophies

12 Value Proposition TPA Improved market opportunity Historically difficult to convert fully insured employers More competitive terms Promote their wellness and cost containment platform Improved client retention

13 Value Proposition - Carrier New / emerging market More protection when converting fully insured accounts Lower individual account volatility Increased fee based revenue Improved client retention

14 Objections - Employer Status quo / inertia Too risky Too new More work to administer self-funded plan Employee benefits are taboo

15 Objections Captive Manager Different function and duration than P&C captive programs Employers and employees need to modify behaviors in order for a captive to be a long term solution Being a catchers mitt likely won t work

16 Objections - Carrier More labor intensive Smaller spec deductibles Offer competing products Retention of underwriting profit

17 Summary Group medical stop loss captive market is growing considerably Opportunity and value proposition outweigh the objections

18