We have sat at every seat at the table. Source of the attached - PowerPoint PPT Presentation

Self Funding Basics and Fully Insured vs. ASO Bundled Self Funded vs. Unbundled Self Funded Pros and Cons Mike Edwards: President MATRIX Group Benefits L.L.C. “We have sat at every seat at the table.” Source of the attached MATRIX Team Experience: Plan Sponsor, Independent Administrator, S.L. Carrier Executive, Hospital V.P., Network Builders

8 Steps to Issuance Step 1: Submission of RFP 1. Nature of Business (SIC Code). 2. City, State, Zip (Multiple Zip Codes). 3. Copy of current plan or SPD with an outline of the proposed schedule of benefits, covered charges, exclusions and limitations. 4. Must provide: a) Employee Participation. b) Dependent Participation. 5. Present Rates and/or Rate History. Current TPA or ASO vendors, medical management and PPO firms and projected possible changes. 6. Name of Carrier for current and previous two years, From _________ through ________. Monthly paid claims and average enrollment for previous period with employee count, claim experience, Specific 7. claimants exceeding 50% of the lowest requested specific deductible, Large Claim Analysis Report with diagnosis/prognosis and any pended claims. 8. Disclosure Statement Shock Loss Details from the utilization review firm, sorted by ICD-9, pre-certified hospital encounters and concurrent Review Reports. 9. Cases 100+ lives. Census and distribution of census for all covered members including retirees and COBRA participants by age/sex, single/family, ZIP code. 10. Shock history, all claims over the specific requested for the past 2 years or more. 11. Requested Effective Date. 12. Contract Basis [ ]15/12 [ ]18/12 [ ]24/12 [ ]12/12 [ ]12/15 [ ]12/18 [ ]12/24. 13. Specific deductibles $25,000+ Requested Specific Deductibles. 14. Retired lives; If yes, how many. Should be noted on Census. 15. Disabled lives; If yes, how many. Should be noted on Census. 16. COBRA lives; If yes, how many. Should be noted on Census. 17. Employer Contribution EE (Employee)_______ DEP (Dependent) _______. 18. Renewal Rates. 19. PPO (Preferred Provider Organization) _______ (Name) 20. If multiple locations, how many participating in PPO’s _______.

CONTEXT OF DISCUSSION Self Funding: What is it? Why Do it? How does it compare to other approaches? Four Focus Points In Any Business Management decision process 1) Structural Conflicts of Interest: Remove them if you can. 2) Transparency and Incentives: Who is at risk? Only the stop loss and Plan sponsor are the focus on the pieces that align. 3) Long Term Strategic OR Short Term cost Tactical Decision: It is strategic and it is long term. 4) Financial Management: It requires Finance and H.R. to work together. Stop loss is a finance decision NOT a benefit decision.

Self Funding: What is it? Why do It? • IT IS: Federal Jurisdiction ERISA and that means flexibility, and accountability by the Plan Sponsor. (see NAIC 2015 White Pages) • YOU ARE: The Plan Sponsor is the insurance company, you control the plan AND the data. • YOU CAN: Hand a check over for 15% of operating expenses (fully Insured). • OR YOU CAN: Manage the 15% of your operating expenses with your checkbook . • WHY Do It?: Because it’s a number worth working on and your participants fund the plan with payroll deductions. Spend time, spend resources, it’s a big priority. Hire a consultant and listen to them.

Self Funding: What does it look like? THE BOX It is a BOX and the right hand horizontal side of the box has a CORRIDOR. That • is NOT what you will pay but the most you MIGHT PAY . That corridor is the price you pay to know what you are paying. Risk of no transparency and remove the structural conflicts of interest. If you bundled excepted corridor and factor it to be much lower than and independent underwriter and expect to be in the dark. Focus on the fixed cost and WHO and HOW the costs are managed. S.L Where you should line up Cost of Specific $ 50,000 Fixed Cost $ 250,000 Specific Deductible Focus Here You 25% S.L Aggregate Variable Factors NOT rates $ 187,500 NOT here (as much) You are responsible for everything. You purchase stop loss to reimburse everything outside of the box, those reimbursements can be managed to zero cash flow impact. (see NAIC 2015 White Pages)

Self Funding vs. Fully Insured • Fully insured, horizontal end of the box, you hand a check over, there is no CORRIDOR for the right hand of the box and you cannot see what is in the box. If you bindle and self fund, you probably pay more for a box that has a lower corridor and a right hand end moved inward. • Self Funding you are the insurance entity and you own the data. FI- PROS: It is easy. You bind early. They have leverage over providers and it • is incurred. FI-CONS: With technology today why would data NOT be current? Why do • you need more than 12 months of coverage for incurred claims? Does the carrier have leverage or a partnership with providers? SF-PROS: Can remove structural conflicts, if you are careful. It is transparent. • It provides a flexible adaptable strategic plan. It has the isolated numerical abilities to manage independently PERFORMANCE of all your vendors. SF-CONS: It is not as easy, you take some risk. You need outside team • members. It requires more discipline and timely reporting. It requires a 3 to 5 year strategic commitment.

Self Funded: Bundled VS Unbundled • Bundled: ASO administration only BUT with stop loss, med management, network and administration. ERISA status with restricted administration reporting, plan design and run by fully insured personnel • Unbundled: Truly Unbundled, true third party status, broker deals with stop loss NOT Administrator, med management and network separate B-PROS: Leverage over providers, one number, standard reports, easy terms, early • binding, lower variable factors (that right side of the box). B-CONS: They adjudicate (TO JUDGE) your claims coming from providers they are • contracted with on a proprietary basis?? Fixed cost is higher, with no flexibility or creativity. Most often they choose or are vendors for plan management. UB-PROS: Removes structural conflicts, aligns incentives, adds as much transparency • as you demand, enables financial management by line item, lower fixed cost. UB-CONS: Not the easy button, requires a team and HR and finance need to be • together, high variable factors, requires CURRENT good data, needs a top outside Quarterback (Broker or Consultant, maybe a TPA at QB, but typically NOT a good idea for a T.P.A. in that position.)

Conclusion: • Address your health plan as you would any MAJOR strategic long term cost decision. • “Easy Button” not the best approach this is way too much money. • There is always risk when you get rewards. • Large claim exposures for any employer are only 9-12% predictable year to year, that makes stop loss a long term exposure. Buy the best contract and the best reputation. STOP LOSS IS NOT A COMMODITY and TPA’s need to be paid to do a top job. • Demand accurate unbiased and current reports: – “Trigger” reports – represent anybody hospitalized more than 15 days, It is critical that you have this and that it makes sense. – Aggregate reports – show the month, claims, # of people that month that had claims, large claims. Aggregate reports are so simple yet employers do not demand to have them. Bottom line…not complicated, demand it! • Hire a first round Quarterback, and remove the structural conflicts of interest. • Demand to know how everyone gets paid “the MATRIX Golden Toaster Award” Summation and Questions NEXT slide

Summation and Questions • We have no time to read, find the time. • Incentives: align them or at least know them • “The handshake that changed healthcare history.” *see attachment • Strategic: It’s a multi year exposure that can cost you BIG time if you buy on short term price. • “The U.S. Mortgage system versus more strategically sound models” *see attachment • “You want cheap toys you get lead paint.” (Tony Wong, Hong Kong businessman) • Transparency • “White Paper ERISA redux some modest proposals” *see attachment • “The handshake that changed healthcare history.” *see attachment • Financial Management • “Easy Button” for this much money, do the work. Hand outs and References: 1) Stop loss 101 2) Handshake that changed health care history 3) ERISA Redux Carl Harker and Al George 4) *Met Life vs. Glenn 5) Self Funding of Health Care Benefits, Carl Harker FSA ( Book upon request )