2. The Standard Market
The Standard Market = Minimal Control, No Transparency
• Unanticipated rate increases
• Burdensome plan marketing
• Available responses
– Change carrier
– Change benefit levels
– Change contribution schedule
Today’s annual cost increases will double premium in 6 years
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3. Average Annual Premiums
Average Annual Premiums
for Single and Family Coverage, 1999-2009
1999 2,196
5,791
2000 2,471
6,438
2001 2,689
7,061
2002 3,083
8,003
2003 3,383
9,068
2004 3,695
Single
9,950
2005 4,024
10,880 Family
2006 4,242
11,480
2007 4,479
12,106
2008 4,704
12,680
2009 4,824
13,375
- 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000
Source: Kaiser/HRET Survey of Employer – Sponsored Health Benefits. 1999 – 2009.
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4. Larger Employers – Self Fund
Percentage of Covered Workers
in Partially or Completely Self-Funded Plans, by Firm Size, 1999-2009
Source: Kaiser/HRET Survey of Employer – Sponsored Health Benefits, 1999 – 2009.
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5. Why Larger Employers Self Fund
• Control over benefit plan and claims administration
• Complete data and cost transparency
• National plan consistency, no state mandates
• Cash flow benefits (“pay as you go”)
• Custom designed best in class wellness/behavioral
programs
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6. Why Don’t Mid-Sized Employers
Self Fund?
Volatility – Employers’ costs can vary significantly due
to large claims or an aggregation of smaller claims.
Turnkey Program – Running a self insurance program
can be intimidating. Plan design, TPA/Network selection,
stop loss contract negotiations.
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7. Captive Definitions
Captive
An insurance company that provides insurance to and is
controlled by its owners.
Group Captive
A group captive is an insurance facility formed by companies
joining together to share risk. Each have a desire to control
their own risk. Member companies maintain good loss
histories and effective risk management programs.
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10. Traditional vs. Captive Market
Policy Loss Limit
$500,000
Group Aggregate for Captive
Amount Specific Deductible
Aggregate available for Participant’s
Deductible exposure
$0
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11. Association Loss Application
The Hierarchy of Loss Application
1
1. Losses shared Pro Rata of each
Participants Assumed Premiums Proportional Share of All
Participants’ Loss Fund
2. Then, the Pro Rata Collateral of all
2
Participants’ proportional with their
Assumed Premiums. Proportional Share of All
Participants’ Collateral
3. Aggregate Reinsurer 3
*Individual employer aggregates can be Aggregate Reinsurer
reinsured via the Group Captive layer
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13. Underwriting Guidelines &
Submission Requirements
Underwriting Guidelines
• 50+ lives
• Minimum of $20,000 deductible
• Support culture of health and wellness
Submission Requirements
• Completed application or RFP outlining criteria
• Current detailed census
• 3 years stop loss premium and detailed claims history
• Copy of current policy
• Copy of the current plan accompanying documents
• Identity of the current and/or proposed TPA
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