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In This Issue
Alternative Plan Funding Mechanisms for All Employers
This edition keys on some alternatives that mid-size and smaller employers have relative to the use of self-insured and hybrid funding approaches to health plans. There are solutions that fit virtually every size and degree of risk tolerance. One might free up a substantial amount of cashflow for a company that now considers itself too small to use sophisticated financial devices. See frame below.
Optimizing International Benefits for Deployed Employees
We also touch briefly on the concept of International Benefits. Many employers pay too much and realize too little employee satisfaction when deployed employees/dependents seek care in an overseas location. If approached properly, it can be both extremely cost effective and provide a high level of employee satisfaction. Minimum employer size: 50 total employees with at least 2 deployed. Number one reason for failure of ex-pat assignments: health care issues! See bottom frame.
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| Insurance versus Self-Insurance of Health Plans
-- Speaking As a Broker
It Doesn't Have to be an All or Nothing Decision |
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 BBCG often counsels smaller employees regarding the balance of upside potential versus downside risk when considering a shift to self-insurance. Usually, these discussions occur after a series of "good years" where an employer feels the carrier has not fairly reflected its experience in renewal rate setting. Conversely, large employers almost universally choose the self-insured approach. The large employer has many of the same financial considerations but they also often have multiple state jurisdictions with which they would be forced to contend if they remained insured. Self-insurance allows benefit plan regulation to fall under ERISA, and the DOL, as opposed to various state departments of insurance with a myriad of different benefit mandates.
Whether a small employer or a very large employer, the fundamental reasons to be self-insured are the same:
- an immediate cashflow infusion to the employer of approximately 20% annual claims when the shift is made to self-insurance (i.e., IBNR reserves previously paid into the insurance company pay emerging claims for the first 2-3 months)
- the ability to tailor benefit provisions exactly the way the employer wants them to be
- the avoidance of state mandated insured health plan requirements
- the ability to make "extra-contractual exceptions" in claims adjudication decisions that virtually no carrier will make under an insured contract due to liability concerns
The downside issues are:
- potential claims exposure will be higher than if insured
- rarely does the full potential exposure actually emerge
- full exposure must still be considered
the IBNR liability remains an unfunded liability on the balance sheet
- the unfunded IBNR only becomes problematic if the health plan terminates in entirety or if the employer wants to return to an insured approach
For medium sized employers who want to consider the cashflow enhancement of self-insurance but are not comfortable with taking on the additional potential claims risk, BBCG may be able to assist you with shifting back to the employer the cash IBNR reserve now held by the insurance company and replacing it with a contractual obligation via policy addendum. By definition the health plan would remain insured. However, the change would cause the policy to become "reserveless", freeing up the same cashflow as if it had gone completely self-insured (i.e., approximately 20% of annual claims). The downside risk of the substantially higher potential claims liability of self-insurance is avoided using this approach. A small bump in the expense load might be expected due to the carrier's lost interest earnings on the IBNR balance returned to the employer.
Medium-sized employers who have been "reserveless" for a period of years should also consider taking the plan into the shop for a tune-up. BBCG has found in client files older contractual arrangements that fail to reflect current plan designs and claims paying technology. The results have been a substantially overstated liability both on the client's balance sheet and possibly due the carrier if a termination/change of carrier is contemplated . BBCG can assist in immediately unbooking the unwarranted portion of the liability and adjusting the carrier policy provisions appropriately. Depending on employer size, BBCG has found some of these to be relatively large numbers.
Even for small employers BBCG can provide self-insured solutions. The cashflow advantages are not substantial but neither are the risks. The real upside for the smaller employer is the flexibility to design and manage a plan the way the employer chooses and the avoidance of state insurance mandates. The ability to make non-discriminatory extra-contractual exceptions is often also an attractive advantage for small employers.
It is important to note that in addition to more traditional point-of-service and PPO type plans, BBCG can assist with hight deductible HSA plan designs that can be used for any sized employer and for any financial arrangement (i.e., insured, hybrid, self-insured).
Please email us at [email protected] for assistance with your self-insured plan's stop-loss needs. |
| International Benefits
As Few As Two Employees Abroad Qualifies |
 Since 2001 more and more small employers with defense oriented products are sending consultants overseas. Offshore manufacturing often requires a couple of key employees on site. In some cases US domestic employers are importing "in-pat" talent to supplement needs they have here. There are many more examples.
These are usually employees who have specialized needs. The domestic health plan in the US may fail to optimize the approach to these individuals both in terms of benefit design and in terms of the cost of offshore health care services for which claims are paid. The latter consideration can be substantial if there is a relatively high use of services without any negotiated provider pricing or a lack of knowledge regarding a reasonable benchmark on the part of your domestic claims payor. There are also similar issues related to specialized needs in banking and payroll mechanics.
If your company has at least 50 employees on the payroll and at least 2 employees deployed overseas, BBCG can provide you proposals for state-of-the-art approaches. Refer to BBCG's web page at http://bocabenefits.com/expat.htm for more details.
Please email us at [email protected] for assistance in receiving an international benefits proposal.
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Free Materials Related to Employee Incentives Programs
BBCG has asked Meritain Health, to provide copies of their proprietary white paper entitlted "Employee Incentives: What You Need to Know to Achieve Maximum Results" to readers of The Insight who request it. This is a relatively comprehensive piece with excellent information for corporate decision makers.
Please contact us via email at [email protected] to request a copy. Please include in your email your name, title, company, phone and shipping information.
If you have a group for which you need a speaker and/or multiple copies of the above white paper, please email us at [email protected] and provide us with details. | |
About Boca Benefits Consulting Group, Inc.
BBCG, Inc. has been providing brokerage and consulting services to Florida employers since its formation in 1996. Its principal consultant, Robert W. Murphy, has 28 years of insurance carrier management and consulting experience. He holds an advanced financial degree and four of the most prestigious financial services designations in the industry (REBC, ChFC, CLU, RHU). He has been a panelist/speaker at a national conference on the future of healthcare and was a participant at a Harvard University executive program entitled "Skills for the New World of Health Care."
Please click here for additional contact information.
Please click here for a proposal request or contact by BBCG. |
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| Rating Your Health Risk Assessment, Disease Management and Wellness Plan Incentive Program
- Does it have a clear and logical purpose?
- Has there been an unbiased calculation of program's present and projected long-term ROI?
- Does it have a simple design and ease of administration?
- Does it establish "date certain" goal accomplishment milestones?
- Are the rules communicated to emloyees perceived as simple and fair to all?
- How well do communications pertaining to incentive programs work?
- Are the tasks required for participation clearly understood?
- How frequently are the incentives "re-sold" to employees via supplemental communications?
- Are the incentive programs truly non-discriminatory to both individuals and groups?
- Is there a loadable debit card being used by participants for periodic goal attainment cash rewards?
- Are rewards for goal attainment adequate to motivate the desired action?
- Have all the programs been analyzed in total to ensure proper alignment with business objectives and overall corporate culture?
Critical Consideration: HIPAA Compliance
If standards-based, has internal discrimination testing been done to ensure HIPAA compliance?
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New 2009 HSA Plan Limits Released by IRS
(reprinted from The Insight Issue: 08.9.3 / IRS 2009 HSA Regulations / July 31, 2008)
1. Eligible individuals with self-only coverage under a high-deductible health plan (HDHP) may contribute an annual maximum of $3,000 to their Health Savings Account (HSA) for 2009.
2. Eligible individuals with family coverage (coverage for two or more individuals) under a HDHP may contribute up to $5,950 to their HSA.
3. Catch-up contributions. Individuals age 55 or older who are not enrolled in Medicare may contribute more to the account per year. In 2009, an additional $1,000 contribution will be allowed. In 2008, the catch-up contribution was $900.
To be considered qualified for an HSA in 2009, the HDHP must meet the following IRS regulations:
1. The minimum deductible amount must be $1,150 for self-only coverage and $2,300 for family coverage.
2. The out-of-pocket maximum must be no higher than $5,800 for individual or $11,600 for family coverage.
3. The HDHP must be set up with a combined medical/pharmacy deductible. This deductible must apply to the out-of-pocket maximum (no change from 2008 requirement).
4. All medical and pharmacy services must be subject to deductible and out-of-pocket maximum except for preventive services. |
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