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Next Generation Solutions for Small
Group Health Plans
11697s1016
One Hour CE
Creative concepts to restore affordability
How would you define “Affordable”
Health Care?
What is “Affordable” Health Care?
How do we achieve “Affordable”
Health Care?
2016 USA Health Plan Market Segments*
Persons Covered
Group Plans 139,800,000 43%
**Medicaid 81,000,000 25%
**Medicare 55,000,000 17%
Individual
**On Exchange Subsidized 9,400,000 3%
On Exchange Non Subsidized 1,700,000 .5%
Off Exchange 9,100,000 3%
Uninsured 28,000,000 9%
Total US Population 2017 324,000,000 100%
**Gov Subsidized Plans 145,400,000 45% * Kaiser Foundation 2016
State of Iowa Business Profile
Source: U.S. Bureau of Labor Statistics (2015)
State of Iowa Small Group Market
Source: U.S. Bureau of Labor Statistics (2015)
USA Projected Family Cost by 2022 = $33,319
$33,319
(2022)
2017 Health Care Spending USA
• $3,300,000,000,000 (Trillion)
• $10,348 per person
• 17.9% of GDP
• Annual Growth 2017 – 4.3%
Amazon, Berkshire Hathaway, JPMorgan Chase To Tackle Health Care
Growing health care costs “act as a hungry tapeworm on the American
economy,” said Berkshire Hathaway CEO and chairman Warren Buffett in a
statement. “Our group does not come to this problem with answers. But we
alsodo not accept it as inevitable. Rather, we share the belief that putting our
collective resources behind the country’s best talent can, in time, check the
rise in health costs while concurrently enhancing patient satisfaction and
outcomes.”
Jan. 30, 2018
Change is Coming!!
Health Care Cost Drivers
1. Business Practices – Marginal business practices of government, insurance companies,
providers and medical vendors and suppliers
2. Drug Costs – Mercenary pricing
3. Transparency – Lack of transparency with actual costs and appropriate profit margins
4. Litigation – Threat of litigation drives costs through redundant “defensive” medical practices
and malpractice insurance costs
5. Wellness – Unhealthy lifestyles choices
6. Media Distortions – Promoting an entitlement mentality… “Free” is not “Free”
7. Consumer Education – Lack of informed medical consumers
8. Technology – State-of-the-art medical technology prolongs life
9. Aging Population – Baby boomer generation experiencing deteriorating health
10. Government – Cost of Compliance ACA, EHR and additional taxes
11. Politics – Marketplace volatility driven by political uncertainty
12. Catastrophic Claims – Unlimited lifetime benefits driving cost increases
Increases Cost
Adverse Elements of the Affordable
Care Act Cost Structure
Impact of ACA Unlimited Lifetime Max
Source: Allied National Claims Data Base 2017
Claims In Excess of $1,000,000 Incidence Increase 2012 to 2016
$1M Claim Population % increase
2012 1 17,422
2013 1 14,184 23%
2014 1 12,903 35%
2015 1 10,706 63%
2016 1 9,198 89%
Estimated*
2020 1 7,500 132% * These estimates are based on various untested assumptions
Increase in $1,000,000+ Claims
2012 - 2016
Source: Allied National Claims Data Base 2017
0
0.2
0.4
0.6
0.8
1
1.2
1 2 3 4 5
?
Increase in Catastrophic Claims
Source: Allied National Claims Data Base 2017
Claims In Excess of $5,000,000
Incidence Increase 2012 to 2016
$5M Claim Population % increase
2012 1 10,000,000 100%
2013 1 3,333,333 300%
2014 1 1,111,111 900%
2015 1 1,000,000 1000%
2016 1 833,333 1200%
Estimated*
2020 1 450,000 2222%
Source: Allied National Claims Data Base 2017
0
0.002
0.004
0.006
0.008
0.01
0.012
0.014
1 2 3 4 5
Increase in $5,000,000 claims 2012 to 2016
Increase in $5,000,000+ Claims
2012 - 2016
Estimated Claims in Excess of
$1M & $5M in Iowa
(Based on Allied National Stop-Loss Data Factors
Applied to Iowa Population)
Changes in Health Care Financing
Costs Since 2012
Administration Sales Health Care Costs 8-10% 3-5% 85 - 89%
Administrative - 10%
Sales - 20%
Medical Costs + 60 - 80%
Small Group Plans – The Real Competitor
Affordability!!!
• At what point does the employer say
“No more plan?”
• At what point does the employee say:
“Take me off the plan?”
• At what point will the broker run
out of affordable solutions for their client,
the small employer?
5 Affordability
Solutions!!!
Solution #1 Level Funding
Fully Insured
• Risk bearer is the insurance company
• All RISK transfers to insurance company
Self Funded & Level Funded
• Employer is the risk bearer!
• Claims paid from employer’s claims fund
• Employer hires/assigns a claims administrator to pay claims
• Employer purchases stop-loss insurance to limit risk
Level Funding for Small Employers
Self Funding
• The Employer’s ultimate costs are variable and unknown
and based entirely on the cost of claims
• Typical for employers with 100 FTES or more
Level Funding
• Employer’s ultimate costs are capped and limited to a
specified dollar amount
• Level-funded plans are limited to 12 monthly
payments
• Available for groups as small as 2 lives
Level Funded Plans are
medically underwritten
(back to the future!)
“Underwriting trumps sales.”
The long term success of the small group level-funded market
requires that stop loss carriers generate an underwriting profit
from their pool of level funded plans. Those stop loss carriers
demand a disciplined approach to underwriting each risk, both
as a new business and at renewal. With level funded plans good
risks receive favorable rates, poor risks are declined; the best
risks will have an opportunity to participate in the underwriting
profits generated by their group.
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
Why Level Funding ?
Long Term – It’s the most cost effective way to
finance a group health plan
• Reduces 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
A Level-Funded Solution
(Refund)
Solution #2 Reference-Based Pricing
(No networks!)
Medicare or some other reimbursement framework
established by a third party for services offered by health
care providers.
Bundled Rates are reimbursement rates specific to a
procedure like appendectomy or hip replacement.
Unique reimbursement rates developed by the plan
itself, based on historical charges for health care goods
and services.
Why “Reference-Based Pricing”?
• Lower costs
• No network limitations
• All providers are “in network”
• Better transparency
• No network access fees
• Better cost predictability
Why….? “Not Networks”
Shift to Cost-Based Reimbursement
1. Network agreements are based on a discount off of
billed charges
2. Billed charges bear little relationship to actual costs
3. Employers looking to pay for true value of health care
services are seeking cost based reimbursements rather
than “discounts”
• Reference-Based Pricing = % of Medicare allowable
• Physicians =125% Medicare allowable
• Hospitals and other providers =150% Medicare allowable
• Employee can go to any provider
• No network access fee
• No out-of-network penalties
• ACA compliant
Reference Based Pricing
125% of Medicare allowable
Sample Card
(Back)
150% of Medicare allowable
Education is Critical
(Consumer Driven Health Plans - CDHP)
Educate Providers
Educate
Employees
and
Family
Educate Agents and
Staff
Educate Employers
Increase in Medicare Eligible Next 5 Years
U.S. Census Bureau
2015 Total U.S. Population
321,418,820
2015 Total
>65 - 2015 Medicare eligible
54,048,013 16.82%
>65 - 2020 Medicare eligible
73,117,890 22.75%
Increase
19,069,877 5.93%
Will the “RBP” be Accepted?
By 2020, 23% of the U.S. population will be receiving medical
services at a “Medicare-based” reimbursement rate.
Will the “RBP” be Accepted?
2017 Claim Results
Reference Based Pricing
Billed Charges Received $67,000,000
% of claims disputed 0.84%
$ of claims disputed 4.56%
Dispute Outcomes
Favorable Dispute Outcomes 95% Discount adjustment in favorable
outcomes from 58% to 36%
Average Discount
RBP 69%
Cigna 43%
PHCS 32%
First Health 35%
ProviDrs 45%
RBP Multi State Sample Rate Differential $2500 Ded H S A Plan
PHCS Freedom
EE ES EC Fam EE ES EC Fam
Omaha Ne 551 1133 766 1348 412 848 580 1016
Lincoln Ne 567 1166 789 1388 392 807 553 968
Grand Island Ne 511 1046 710 1248 372 766 524 918
North Platte Ne 533 1094 740 1301 372 766 524 918
RBP Case Study
Bank Holding Company
3,900 employees – 9 states
Adopted RBP in 2014
120% Medicare – Physicians
150% Medicare – Institutions
Notified all Physicians & Institutions
Saved $850K in network access fees
Reduced claims costs in 2014 - $2.5M
Total cost reduction Year 1- $3.35M (17%)
Network vs. Bundled Pricing
Hip Replacement
Regional Hospital & Specialists
Billed Charges - $145,000; discount
60%
Actual costs - $58,000
Surgery Center of Oklahoma
Bundled Price Hospital & Surgical
Actual costs - $25,000
https://surgerycenterok.com/pricing/
Integrating
Direct Primary Care
With
Level-Funded Plans
Slash Costs!
Increase Access!
Improve Care!
11717s0617
Solution #3
Why Direct Primary Care now?
• Direct Primary Care enables
individuals to contract directly
with a primary care physician for a monthly fee.
• Very affordable!! (less than deductibles & copays)
• No insurance involvement.
• Contract specifies services to be performed.
• 24/7 direct access to DPC via technology
• DPC may offer an Rx benefit (state specific).
• DPC focuses on wellness, patient relationship and health
care advocacy not insurance documentation.
Why Direct Primary Care now?
…….for the Physicians?
• Better quality of life
• More choices
• Higher incomes – lower overhead
(700 x $65 x 12 = $546,000 annual income)
• Greater professional satisfaction
• Stronger patient relationships
• Better health care outcomes
DPC Services include:
• Annual exams
• Preventive screenings
• Urgent-care visits
• Basic lab work
• Sutures, minor injuries
• Routine illnesses
• Pediatric care
• Disease management
(diabetes, asthma, etc.)
• Healthcare Advocacy
Employee
& Family
Insurance
Agent
Carrier
Network
Specialists
and
Institutions
Employer
Primary
Care
In the United States today,
the insurance card has become
the gatekeeper to health care.
Employee
& Family
Healthcare
Advisor
Insurance
Company
Network
Specialists &
Institutions
Employer
Direct
Primary
Care
Direct Primary Care is the new
gatekeeper to health care.
X
X
X
X
X
Small Group Level-Funded Plans With
Direct Primary Care
• Direct Primary Care materially reduces the cost of
healthcare
• The DPC fee structure coordinates with level
funding underwriting rate methodology.
• With a contracted DPC in place lower rates can be
offered for level funded plans by:
a. Removing the rate load for office visit costs and
Rx benefits (Rx credit varies by state})
b. Installing larger deductibles and co-pays
c. Rate credits free up the dollars to help offset the
cost of the DPC services
A Level-Funded Solution with DPC
(With Larger Refund)
Direct Primary Care
DPC Sample Case Summary 23 FTEs enrolled 3 years results
Mo Rate/FTE
Standard Level-Funded Plan 3 year costs $ 365,076 $ 441
3-year costs after DPC discounts $ 317,556 $ 384
Rate credit applied for DPC $ (47,520) $ (57)
Cost of DPC Services $ 56,160 $ 68
3-year total claim fund $ 148,764 $ 180
Claim fund refunds paid $ (93,012) $ (112)
Trend increases avoided (RBP year 2&3) $ (22,924) $ (28)
Net 3-year cost $ 257,780 $ 311
Net Savings over 3 years $ (107,296) $ (130)
% Saved -29.4% -29.4%
Annual Savings per FTE $ (1,555) $ (130)
DPC + Level Funding = Lower Cost
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 [email protected] l www.alliednational.com l
twitter.com/alliednational
$600
$500
$400
$300
“E
mp
lo
ye
e O
nly” R
ate
2015 2016 2017 2018 2019 2014
Year
“Employee Only” Rate Illustration
$700
The Compelling DPC Story
• Higher quality health care
• Saves money
• Saves time
• More immediate access
• Personal relationships
• Proactive health care
• Active disease management
• Communicate with technology
• Catastrophic coverage
• Improved DPC value perception
• Need a larger DPC “Community”
• Standardization of DPC services
• DPC services for multi-location employers
• ERISA & DOL employer compliance
• Employer or employee-paid DPC?
• Plans with and without DPC
• Tax deductibility of DPC
Practical Integration Challenges
Disruptive changes!
Integration of Level Funding, RBP & DPC
• New language (medical & insurance)
• New collaboration
• New and different story
• New business model
• New insurance model
• More education
• More moving parts!
• More time!
Solution #4
Individual Limited Medical
Available Now!
(This example is for illustrative purposes only)
SAMPLE Benefit Levels
• Hospitalization up to a $2,000,000 Benefit
• ICU up to $90,000 benefit
• Skilled Nursing up to $15,000 benefit
• Specific Benefits: Office visits, Xray & Lab, Surgery Benefit,
• In-Patient Mental & Nervous, other
• 12 month pre-existing condition exclusion
Benefit Amounts are determined by level of plan purchased
Individual Limited Medical
Sample Rate (will vary by benefit level, age & state)
• Individual – 35 year old $ 96/mo
• Individual – 47 year old $154/mo
• Individual & Children – 41 year old $252/mo
• Family – 45 year old $436/mo
Solution #5…..YOU!
The Healthcare Adviser
You are now a “Healthcare Adviser”
(not an insurance agent)
Skills Health Insurance Agent Healthcare Adviser
Benefit Plan Designs X X
Marketplace Options – Carriers,
Networks
X X
Cost Comparisons X X
Commissions X
Compliance HIPAA, ERISA, DOL X
Level Funding Structure X
Medical Underwriting X
Employee Education X
Regulatory Reporting X
Claims Analysis & Review X
Referenced Based Pricing X
Direct Primary Care X
Long Term Strategic Planning X
Fees for Service X
Time 40 Hours per account/Year 70 Hours per account/Year
Who is a Health Care Adviser?
• A trusted strategic partner
• Professional equivalent of attorney or CPA
• Management team member
• Technical consultant
• Resource for compliance
• Resource for communications
• HR leadership and planning support
• Insurance market access point
Identifying a Competent
Health Care Adviser?
• Technical competence – insurance, risk financing,
regulations and HR compliance
• Understand employer’s business issues
• Builds client loyalty and respect
• Has systems, processes and support
• Strong communications skills
• Market access and knowledge
• Wise, humble, committed and ethical
• Willing to drive change!
Am I going to……………..
1. React to change?
2. Embrace change?
3. Drive change?
Changing your perspective
Salesmanship
Changing your perspective
Leadership
60
Salesmanship talks Leadership listens
Salesmanship reacts Leadership prepares
Salesmanship sings Leadership writes the music
Salesmanship is spontaneous Leadership is systematic
Salesmanship makes money Leadership builds value
Salesmanship solve problems Leadership solves people
Salesmanship creates fans Leadership builds legacies
Salesmanship is arrogant Leadership is humble
Salesmanship reinforces beliefs Leadership changes beliefs
Salesmanship drive sales Leadership DRIVES CHANGE
Are you a salesperson or a leader?
Leadership understands…..
1. Our client s needs us
more than ever…
2. We will work harder…
3. We must drive change!
4. Leadership is NOT optional
How are you going to deliver
“Affordable” Health Care?
Reminder!
CE Credit Sign In Sheet
1 hour CE Credit
Be sure to sign on CE Credit form
Thank you!
Daniel R. Meylan
National Sales Director
Allied National
Overland Park, Ks 66207
www.alliednational.com
Thank you
Allied National Sales
• Dan Meylan: National Sales Director; 913-945-4253
• Bill Ringhofer: Regional Sales Manager; 913-945-4266
• Randy Wehner: Sales Manager; 913-945-4267
• Jill Carroll: Account Executive; 913-945-4255
• Jerri Moise: Account Executive: 913-945-4261
