WORKING ORKING WIT WITH H INDEP INDEPEND ENDENT ENTS Benefit Advisors Network: July 10 th , 2019
TODAY’S AGENDA WHY have this conversation? • SIIA’s research • Employees are still feeling the pain • BUCAA’s Results • What do the Big Boys do? • Program’s Structure INDEPENDENT • TPA – Third Party Administrator • PBM – Pharmacy Benefit Manager • Network • Direct Contracting • Centers of Excellence • Direct Primary Care • On-Site Clinics • Reference Based Pricing
SE SELF INSURAN INSURANCE E INSTITUTE INSTITUTE OF OF AMERIC AMERICA Why do emplo hy do employer ers s self self fund their healt fund their health h plans? plans? • The employer can customize the plan to meet the specific health care needs of its workforce, as opposed to purchasing a 'one-size-fits-all' insurance policy. • The employer maintains control over the health plan reserves. • The employer is free to contract with the providers or provider network best suited to meet the health care needs of its employees.
A A BIGG BIGGER ER BITE BITE Middle-class families’ spending on health care has increased 25% since 2007. Other basic needs, such as clothing and food, have decreased. Percent change in middle-income households' spending on basic needs (2007 to 2014) Hea ealth h Car Care 24.80 .80% -3.60 .60% Food at home me -6.00 .00% Housi sing -6.30 .30% Total Transpo sportation ion -6.40% 6.40% -7.60 .60% Total l Food -13.40 .40% Food aw ay y fr from ho m home me -18 18.80 80% Clothing Clothing Source: Brookings Institution analysis of Consumer Expenditure Survey, Labor Department | THE WALLSTREET JOURNAL
Health Insurance is dominated by five companies. The he “BUCAAs”
THE THE BUCAA UCAAs s ST STOCK OCK PRICE PRICE GR GROWTH WTH Net et Inc Income ome 10 10-Year S Stock Grow th (Dec. (De . 2018) Anthem (Blue Anthem Blue Cr Cros oss) 566% 566% $5.4 B $5.4 United nited Healthcar ealthcare $17.8 B $17.8 B 961% 961% 857% 857% $3. $3.6 6 B CIGNA CI 766% 766% $2.0 $2.0 B Aetna Aetna Humana umana $1.5 $1.5 B 1,049% 1,049% SOURCE: Morningstar, FactSet, Financial Times. 2018. SOURCE: Anthem Q4 Earnings Report. 2019. SOURCE: United Healthcare Q4 Earnings Report. 2019. SOURCE: Cigna Q3 Earnings Report. 2019. Prorated for full year. SOURCE: Aetna Q4 Earnings Report. 2019. SOURCE: Humana Q4 Earnings Report. 2019.
BUY UY LIKE IKE A A FOR ORTUNE TUNE 500 98% of employers with more than 1,00 1,000 employees 98% self-fund using a traditional ERI SA plan. ERISA Large employers manage their health benefits spend to inflation levels , not medical trend which can be 3-4 times inflation. Best in class provider netw orks , carve-out PBMs, specialized centers of excellence, and population management tools are used to control costs . The captive enables the same results for middle market employers.
HOW HO W CAP CAPTIV TIVE E FUN FUNDING DING WORKS ORKS Each employer will self-insure at least $10,000 of claims per member, per Risk policy period. Taking SAVINGS OPPORTUNITY For claims between $10,000 and $500,000, employers POOL stop loss Risk premiums and claims. Sharing UNDERWRITING DISTRIBUTION Risk For claims above $500,000 and 125% Shifting of expected, reinsurance is purchased.
THREE THREE BUCK UCKET ETS WHERE DOES WHERE DOES THE THE HEAL HEALTH TH PLAN PLAN DOL DOLLAR AR GO GO? Claims Account (employer Admin Fees (TPA & Network) Pooled Stop Loss Premiums establishes w ith TPA) Commissions Stop Loss (> $500K) 15% OF TOTAL 25% OF TOTAL 60% OF TOTAL FIXED VARIABLE VARIABLE
UNDERST UN DERSTANDI DING NG RISK RISK SHARING SHARING ABC, Inc. MNO Co. EFG LLP $1.75M premium $1.2M premium $1M premium ANNUAL RECONCILIATION: $7.5MM premium* $6.3MM claims $1.2MM distribution *$7.5 Million is used to fund ANY claims between $30,000 and $500,000 regardless of which plan sponsor incurs that claim. XYC Corp 123 Corp XYZ, Inc. $1.65M premium $1.15M premium $0.75M premium
“My insurance carrier doesn’t give me claims data. We Meet Meet the Ca the Captiv ptive e Emplo Employer er have no visibility into where our money is going.” Specific Deductible Variable 85% 85% At least 2 Members of the C-Suite engaged $35,000 Cost in the healthcare plan. Employees 110 on the plan “Health benefits is one of my top 3 expenses. We cannot afford to keep doing the same things.”
TP TPA: A: THI THIRD RD PAR ARTY TY ADM ADMINIS INISTRATOR OR TPA: A Third Party Administrator handles the claims processing for an employer that self-insures its employees. The risk of loss remains with the employer, and not with the TPA. While some third-party administrators may operate as units of insurance companies, they are often independent. They are normally contracted by a health insurer or self-insuring companies to administer services, including claims administration, premium collection, enrollment and other administrative activities.
CARRI CARRIER ER OWNED WNED (SUBSID (SUBSIDIA IARY) ) vs. vs. INDEPEND INDEPENDEN ENT T TP TPA A Independent Carrier Ow ned • Transparent Reporting • Limited Transparency • Limited Auto Adjudication • Auto Adjudication > 85% • Control over Plan • Limited Control (Plan, COE, PBM, • Unbundled Utilization) • Choose Network, DPC, RBP, On-Site • Bundled
PBM: PBM: PHARMA PHARMACY BENEFIT BENEFIT MAN MANAGER GER PBM : Pharmacy Benefit Manager is a third-party administrator of prescription drug programs. They primarily responsible for developing and maintaining the formulary, contracting with pharmacies, negotiating discounts and rebates with drug manufacturers, and processing and paying prescription drug claims. As of 2016, PBMs managed pharmacy benefits for 266 million Americans. Three major PBMs (Express Scripts, CVS Health, and OptumRx) comprise almost 80% of the market and cover 180 million enrollees. In 2017, the largest PBMs had higher revenue than the largest pharmaceutical manufacturers, indicating their increasingly large role in healthcare in the United States.
PBMs PBMs TOD ODAY As my colleague would say… “Follow the Money” “CVS creates new health-care giant as $69 billion merger with Aetna officially closes. CVS Health and Aetna have closed their $69 billion merger . UnitedHealthcare names Optum exec McMahon as CEO UnitedHealth Group is switching up the roles of its top executives. The Minnetonka, Minn.-based insurer said that Dirk McMahon, the current president and chief operating officer of fast-growing business unit Optum, will become CEO of UnitedHealthcare, the company's insurance arm.
CARRI CARRIER ER OWNED WNED (SUBSID (SUBSIDIA IARY) ) vs. vs. INDEPEND INDEPENDEN ENT T PBM PBM Carrier Ow ned Independent • No Transparency • Transparent & Pass through Pricing • Limited Rebates • Employer receives Rebates • Limited Variable Copay • Variable Co-Pay • Limited Control • Control over Formulary
NETW NETWORK ORKS Network: The facilities, providers, and suppliers your health insurer or plan has contracted with to provide health care services. National: Blues, United, Cigna, Aetna, Anthem, Humana, and Kaiser Regional Systems: Sanford, Molina, Medical Mutual, Intermountain, Sutter, MVP, Harvard Pilgrim, UPMC, Advent, Centura, etc…
AL ALTE TERN RNATIV IVE E OPTIONS OPTIONS Five alternative tactics to the common reliance on the BUCAAs Networks: Direct contracting, Centers of Excellence (COEs), On-Site Clinics, Direct Primary Care, Reference Base Pricing 1) Direct Contracting: Self-insured employer partners with a healthcare system to reimburse providers for services rendered. The employer negotiates directly with provider system. • General Motors & Henry Ford Health System • Disney & Advent Health • Middle Market Employers & You name the local or regional system… 2) Centers of Excellence: Focus on specific areas of medicine and care delivery (e.g., bariatric, cancer, transplant, or spine surgery) and provide a high volume of services for those select procedures. Typically, COEs are selected because they deliver the best outcomes, often at a lower cost than competing facilities. Set price with a warranty. • New York City’s Public EEs • Surgery Center of Oklahoma: https://surgerycenterok.com/ • Health City in Cayman Islands • Tom Emerick’s “Cracking Health Costs”
AL ALTE TERN RNATIV IVE E OPTIONS OPTIONS 3) On-Site Clinics: Offer both Primary and Occupational Health Care . On-site primary care facilities allows the Employer control over referrals for often-costly surgical, lab, imaging, and other services available on any schedule necessary to match Employer’s operations. • Chrysler / Indiana factory 4) Direct Primary Care : Plan member pays a monthly flat membership fee. No fee-for-service payments with unrestrictive access to their primary healthcare provider. No third party billing. • 1,100 DPC practices across the US in one coalition • Several Employers in NC, NV, and WA use this model
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