ASO. BlueCross BlueShield of Oregon HOW AN ADMINISTRATIVE SERVICES ONLY (ASO) PLAN CAN WORK FOR YOU AN INTRODUCTION FOR GROUPS OF MT HOOD

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1 BlueCross BlueShield of Oregon ASO HOW AN ADMINISTRATIVE SERVICES ONLY (ASO) PLAN CAN WORK FOR YOU AN INTRODUCTION FOR GROUPS OF Regence BlueCross BlueShield of Oregon is an Independent Licensee of the Blue Cross and Blue Shield Association MT HOOD

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3 How an Administrative Services Only (ASO) plan can work for you Effective Jan. 1, 2016, the Affordable Care Act (ACA) will expand the definition of community pool to include employer groups of This means groups of will be considered small groups instead of mid-sized. It can also bring big changes for you and your business. Rate increases, and standardized plans and benefits are two of them. To help employers like you, we re offering self-funded options for the first time to groups of This option, which used to be available only to larger groups, offers you more benefit and plan options and can mitigate those potential rate increases. Self-funded vs. fully insured health plans With a fully insured health plan which is the traditional funding arrangement for small and mid-sized groups you pay a premium to your insurance company. The insurance company uses that premium to pay for health care and is at risk for claims costs. Meaning, if your employees claims costs outstrip what you pay in premium during your contract year, the insurance company pays the excess with its own money. With a self-funded health plan, you pay for your employees claims out of your own funds. In effect, you act as your own insurer. You contract with a third party (like Regence) to administer the plan. This contract is called Administrative Services Only, or ASO. The third party processes claims, answers phone calls, issues member ID cards, builds a provider network and offers a variety of other services and programs. In essence, the third party does all the busy work of health coverage while you provide the money that pays the claims. Since you assume the risk with self-funded coverage, you also purchase stoploss insurance to limit that financial risk, protecting you from catastrophically high claims. With Regence ASO, all of the administrative duties and stop-loss coverage are handled in one integrated service package. A self-funded group is also a covered entity, which means that the group is responsible for protecting employees PHI (Personal Health Information).

4 Is ASO right for you? Given the ACA-mandated risk pool changes, self-funding could be an attractive option for employers like you. But you ll want to consider your financial strength and risk tolerance, as well as your employees health risk profile, before determining if a self-funded option is a good choice. Here are a few indicators to examine: Sufficient capital reserves Strong cash flow ability to pay weekly claims Tolerance for financial risk Good health risk profile for your employee population Low rate of chronic conditions Few ongoing/large claims An ASO is not right for all businesses. However, if you re looking for ways to mitigate possible increases in premiums and taxes, and have the financial resources to act as your own health insurer, you may want to take a closer look at a self-funded approach. PROS AND CONS OF SELF-FUNDED SOLUTIONS PROS Cost savings You enjoy lower insurance fees, as you avoid the risk charges, premium taxes and company profits most carriers bundle into fully insured premiums. You pay lower state premium taxes, which typically results in savings of 2% to 3% of the premium dollar value. Your organization pays claims when they re incurred and earns interest income on any unclaimed reserves. Your plan is exempt from many state insurance laws, regulations and mandates, all of which can drive up the costs of fully insured coverage. Your population benefits from transparency into the true cost of health care. Control Free from the ACA and state regulations that mandate coverage and carrier negotiations, you have more flexibility to choose benefits and coverage levels. Coverage You can self-fund most medical benefits, including health care, dental, short-term disability, prescription drugs and vision. Multi-state benefits Employers that self-fund across multiple states have to comply only with Employee Retirement Income Security Act (ERISA) regulations and are exempt from most state regulations. CONS Risk With a self-funded plan, you assume greater financial risk and are responsible for large, unexpected medical claims and fluctuations in health care expenses year to year. Stop-loss insurance can provide a safety net if you re looking to cap your risk exposure at a certain amount. Administration You must manage more administrative duties with a self-funded plan from budgeting and reporting to ensuring compliance with federal laws such as ERISA and COBRA. One way around this is to outsource these obligations to an insurance carrier like Regence or a third-party administrator (TPA).

5 How an ASO plan can benefit you Self-funding can reduce your health plan costs or mitigate rate increases. In addition, by switching to a self-funded option, you can avoid paying most ACAmandated taxes and regulatory fees imposed on fully insured health plans, as well as state taxes levied on health plan premiums. Other benefits of a self-funded plan include: Transparency on medical costs Ability to tailor your benefit design to fit your employees Exemption from many state insurance regulations Robust reporting Our reports help you understand your employee population and how your health care dollars are being spent: Benefit Analysis Chronic Conditions Claim Lag Cost Containment Dashboard Enrollment Experience Dental Experience Summary High Claimant Paid Claims Summary Place of Service Summary Specialist Services Summary Stratified Claims Top Medications Top Provider Utilization by Diagnostic Range

6 A level-funding option: a low-risk way to self-fund With a level-funded option, you get the benefit of a fully insured plan a predictable monthly payment with the flexibility to be rated on your own claims experience found in a self-funded plan. Level funding is a self-funded plan, but you pay a fixed monthly fee to cover anticipated claims, administrative costs and stop-loss insurance. Regence uses the money as needed to pay claims. At the end of the plan year, Regence compares what you ve paid against eligible claims and refunds you the difference if you paid in more than you spent. If your eligible claims are more than expected for the year, your stop-loss coverage will cover the difference. Level-funding features and benefits: Self-funded plans aren t subject to state premium taxes and are exempt from many health care reform provisions. Terminal liability limits and stop-loss options are available. A group can set its monthly amount at 110% of expected claims or 125% of expected claims. You re paying only for your claims and the cost of administering them not premiums based on a community rate of similarly sized groups (which may have fewer healthy employees). Consider level funding if: You re interested in self-funding but have concerns about the impact on your cash flow. (Level funding offers stable monthly costs plus protections to mitigate risk and limit liability.) You ve cultivated a culture of wellness and health engagement and have 51 or more employees.

7 Comparing Funding Options Fully Insured Level Funding ASO Funding Aspects Terminal liability limit Comprehensive claims reporting Individual stop loss Aggregate Monthly accommodation Predictable monthly billing with opportunity for a refund Funding level at 110% Funding level at 125% State mandate exception Billing and Banking Monthly billing cycle Weekly billing cycle option Credit risk deposit Plan design flexibility PPACA Fees and Taxes State premium taxes Health insurance industry fee Reinsurance fees

8 How to prepare for the switch from fully insured to self-funded coverage There are financial and administrative responsibilities as well as underwriting criteria required to establish a self-funded health plan. For example, you will need to set up a bank account for the health plan and make some advance deposits. You will also have to ask all of your employees to complete a onepage medical short form if you can t provide three years of historical claims data, including large claims experience and enrollment from Regence or your current carrier. In addition, you will sign an agreement, known as an Administrative Services Contract, to activate your self-funded account. A membership administrator will be assigned to serve your administrative needs, including eligibility and billing questions. Underwriting overview A minimum of 51 enrolled employees are required. If enrollment drops 50% or more from inception, Regence will terminate the self-funding arrangement and your group will have to become fully insured (an exception will be made if the drop occurs within the last two months of your contract). Your group will have to make claims payment via weekly wire or ACH (no checks). You are required to have both pharmacy (OmedaRx) and Regence stop-loss coverage. Rx pricing suite 1 applies Rx rebate options: $9/$27 or 100% withheld by Regence. No other carrier will be allowed alongside Regence. Credit review In order to receive a quote for a self-funding arrangement, you must pass a credit review conducted by Underwriting. If the financial evaluation is very good to excellent, the advance deposit may be waived. If evaluation is poor and Regence quotes an ASO arrangement, an advance deposit is always required. Protected health information (PHI) Your company will be responsible for complying with federal and state laws governing self-funded health care plans. You will have access to reporting and claims data, and you must safeguard your employees Protected Health Information (PHI). Regence doesn t include PHI on billing invoices or reporting to make this process easier.

9 Additional protection you ll want to know about when considering a self-funding or level-funding options include terminal liability limits and stop-loss coverage. Terminal liability limits If you elect to end your agreement with Regence, you will need to budget for claims and administration services after the termination. You will still need to pay claims that were incurred during the health plan year but were received after the termination date of the contract. Specific and aggregate terminal liability coverage can help protect you from additional claims liabilities even after your contract has ended. Specific terminal liability coverage: This option provides three or six months of paid claim run-out protection on the specific deductible if you end your specific coverage at the end of the term. The claims must be incurred prior to the end of the term to be considered eligible. This provision will not apply if the specific benefit terminates before the end of the term, and the provision will automatically be invoked when the conditions explained above are triggered. Aggregate terminal liability coverage: The aggregate terminal liability option provides three or six months of paid claim run-out protection on the aggregate if you terminate your aggregate coverage at the end of the term. The claims must be incurred prior to the end of the term to be considered eligible. This provision will not apply if the aggregate benefit terminates before the end of the term, and the provision will automatically be invoked when the conditions explained above are triggered. Stop-loss coverage All groups purchase stop-loss coverage that includes individual stop-loss (ISL) or specific stop-loss coverage. This is the most you will pay for one individual s claim. Our lowest ISL option is $35,000. Aggregate stop loss protects you from claims incurred by the entire group above a specified level. Our lowest aggregate option is 125% of expected claims. This means if your expected claims are $500,000, you could purchase total stop-loss protection for claims that exceed $625,000. If you don t have the current year s large claims information, you will need to provide a completed one-page medical short form for every participating employee to ensure accurate risk assessment. There are various contract options available for claims run-out. These contract options determine if eligible paid claims are covered under the stop-loss contract after the contract terminates. You can purchase three months, six months or 12 months of run-out protection. (For example: An employee breaks his leg in November, the contract ends in December, and the claim arrives in February.)

10 About Regence ASO for groups of We offer a self-funding option to businesses with a minimum of 51 eligible employees. All benefit plans will include: Stop-loss coverage through Regence (mandatory) Pharmacy coverage Utilization management Case management Additional programs are available as buy-ups. They include: Regence Condition Manager Maternity management Nurse advice line Regence Physical Medicine and other enhanced utilization programs Tobacco cessation program Vision, dental, complementary care and Employee Assistance Programs (EAP) EMBEDDED Included in Base Admin Required Programs Billing Regence stop-loss (includes Reporting supplemental kidney dialysis except Coordination of Benefits on HSA plans) Appeals OmedaRx Pharmacy SPD Review Basic Regence Utilization Management Regence Case Managment OPTIONAL Regence Condition Manager Maternity management Nurse advice line Enhanced utilization management (e.g., Regence Physical Medicine) Smoking cessation program Telehealth Specialty: vision, dental, complementary care and Employee Assistance Program (EAP)

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12 Is ASO right for your company? We re here to help you decide. Talk to your producer or Regence sales executive today or/ Regence BlueCross BlueShield of Oregon