Alaska Government Financial Officers Association Presented by: Jeff Ranf VP USI

Health Insurance Solution Using Captive Risk Pool Presented by: Jeff Ranf VP USI

Today’s Discussion © 2015 USI Insurance Services. All rights reserved. 1  Why don’t more mid-sized public entity employers self- fund?  What is self-funding your benefit plan?  What is a medical insurance captive arrangement?  How can a captive work for Alaska public entities?  Could a group of employers develop their own captive? Why would you want to do this?  Why don’t more mid-sized public entity employers self- fund?  What is self-funding your benefit plan?  What is a medical insurance captive arrangement?  How can a captive work for Alaska public entities?  Could a group of employers develop their own captive? Why would you want to do this?

© 2013 USI Insurance Services. All rights reserved. 4 Why DON’T More Mid-Sized Employers Self-Fund?  The cost of healthcare is scary, don’t want the risk  Volatility – Employer costs can vary significantly due to large claims or an aggregation of smaller claims. Or………..  …fearful of the maximum cost.  Fully insured plans are Turnkey.  Off the shelf.  No decisions need to be made.  The cost of healthcare is scary, don’t want the risk  Volatility – Employer costs can vary significantly due to large claims or an aggregation of smaller claims. Or………..  …fearful of the maximum cost.  Fully insured plans are Turnkey.  Off the shelf.  No decisions need to be made.

© 2013 USI Insurance Services. All rights reserved. 8 What is self-funding?  It’s deciding to take control of your benefit program  It’s designing your own plan around your objectives, not the insurance carrier  It’s taking predictable funding risks  It’s avoiding some of the ACA requirements  It’s seeing where all your money is going including claims  It’s deciding to take control of your benefit program  It’s designing your own plan around your objectives, not the insurance carrier  It’s taking predictable funding risks  It’s avoiding some of the ACA requirements  It’s seeing where all your money is going including claims

© 2013 USI Insurance Services. All rights reserved. 8 What is self-funding?  Employing an experienced claims payer or third party administrator  Purchasing individual / aggregate stop-loss protection  Developing own plan design: Deductible, coinsurance, co-pays, Rx Dental, Vision, Travel, etc.  Deciding how YOU want your benefit to look  Employing an experienced claims payer or third party administrator  Purchasing individual / aggregate stop-loss protection  Developing own plan design: Deductible, coinsurance, co-pays, Rx Dental, Vision, Travel, etc.  Deciding how YOU want your benefit to look

© 2013 USI Insurance Services. All rights reserved. 9 A Medical Captive Risk Program  Traditional self-funded programs pooling multiple employers’ the stop- loss premium  Sharing risk and rewards with like minded employers  Purchasing health insurance like Fortune 500 employers

© 2013 USI Insurance Services. All rights reserved. 9 A Captive Arrangement How does it work? Control --- Plan Design, Wellness, Disease Mgmt. + Transparency --- Claims & Financial Data = Cost Stabilization

© 2013 USI Insurance Services. All rights reserved. 10 How can a Captive work for Public entities?  Employers band together forming their own pool. NOT A MEWA  Utilize regional & national networks  Each group retains own plan designs  Establishing their own stop-loss levels  Pool shares in underwriting profits on a pro-rata basis

© 2013 USI Insurance Services. All rights reserved. WHY?  To smooth out the renewal volatility  To have more control of your costs  Because cities and boroughs are seeking a better solution

© 2013 USI Insurance Services. All rights reserved. # How to plans differ? Fully Insured Plans  100% Fixed Costs  All Services / Options controlled by the carrier  NO Employer Control  Carrier retains all the profits Fully Insured Plans  100% Fixed Costs  All Services / Options controlled by the carrier  NO Employer Control  Carrier retains all the profits

© 2013 USI Insurance Services. All rights reserved. # How to plans differ? Self-funded Plans  40% Fixed Costs  Employer keeps unspent claims  Employer assumes most of the risk …and realizes control and transparency  Employer assumes their own claim volatility  Avoidance of ACA requirements Self-funded Plans  40% Fixed Costs  Employer keeps unspent claims  Employer assumes most of the risk …and realizes control and transparency  Employer assumes their own claim volatility  Avoidance of ACA requirements

© 2013 USI Insurance Services. All rights reserved. How to plans differ? Captive  15% Fixed Costs  Employers assumes some risk, shares some risk and shifts catastrophic risk  Transparency: employer control  Employer retains up to 80% of the claim spend  Avoidance of ACA requirements Captive  15% Fixed Costs  Employers assumes some risk, shares some risk and shifts catastrophic risk  Transparency: employer control  Employer retains up to 80% of the claim spend  Avoidance of ACA requirements

© 2013 USI Insurance Services. All rights reserved. Other than the sharing underwriting profits… Solving the volatility issue… Pooling with other employers…. It looks and feels like your own plan. The Look and Feel

© 2013 USI Insurance Services. All rights reserved. NOW WHAT? Usual submission of Info (census, plan design, rates, claims) Third Party Administrator (TPA) Benefit Plan Design & Retentions Stop-loss Levels

Thank you Presented by: Jeff Ranf VP USI