NAHU

1

• NAHU
• Discussion on Health Insurance Markets and
  Purchasing

2
About NAHU

• The National Association of Health Underwriters
  represents over 20,000 health insurance agents,
  brokers and employee benefit specialists
  nationally.
• Our members sell health insurance and employee
  benefit products. Annually we assist millions of
  Americans with their insurance needs.
• Our members help both individuals and also
  employers purchase health insurance products.
  Our employer clients range from fortune 500
  companies to sole proprietors.

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Role of Health Insurance Agents, Brokers and
Consultants

• In addition to selling the insurance products our
  members help their clients, with all sorts of
  employee benefit issues, including assistance
  with claims processing, COBRA administration,
  privacy issues, and more.
• Most of our members are independent health
  insurance agents, brokers or consultants, and
  many are small-business owners themselves.
• Our members have a distinctive knowledge of the
  health insurance marketplace, including an
  understanding of what consumers want, the
  underwriting process, the perspective of the
  business owner and the economic realities of
  health insurance markets.

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Nations Healthcare DollarWhere Does It Go?
Physician Clinical Services 22
Physician Clinical Services 22
Source Adapted from Centers for Medicare and
Medicaid Services, 2007
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Health Insurance Markets
Small Group 2-50 Employees
Large Group 51 or More Employees
Individual Coverage Can be for a single person
or any type of family
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• Individual
• Health
• Insurance

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Who is buying Individual Plans?

• Short-Term Medical Coverage
• Students
• College Graduates
• Americans Between Jobs
• Long-Term Medical Coverage
• Independent Contractors
• Sole Proprietors Individual or Group?
• Employees without group coverage
• Employees who have group coverage but find
  
• individual plans as a lower cost option
  
• Employees purchasing children only coverage

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Individual Health Insurance

• Approximately 14 million nonelderly Americans
  obtain health insurance coverage through
  individual plans
• A number of Americans find Individual plans as
  their best option or their only option for health
  coverage
• Individual medical polices maybe designed for
  long-term coverage or short-term period
• States separately regulate how individual
  policies may be marketed and sold
• Cost is often the primary factor for individual
  health insurance consumers

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Individual Health Insurance

• Individual health insurance companies are more
  limited than group insurance companies in their
  ability to spread risk
• Most federal HIPAA provisions do not apply to the
  individual market
• In most states individuals are asked to provide
  medical history-Prevents Adverse selection
• Decline coverage
• Elimination Rider or Amendment
• Rate the policy-Increase premium
• Market changes in last couple yearsMore use of
  Rating in the Individual market than Riders

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Can I still buy individual insurance?

• States have developed ways to provide uninsurable
  people with access to individual health
• 33 States have High-risk pools
• 12 States-Designated carrier or
• require issue regardless of health status
• 5 States-No options for providing coverage
• to individuals with serious health
  conditions

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How Individual Premiums and Renewal Premiums Are
Determined

• Some States you will be assigned a rate class by
  the company and put into a pool of other insured
  individuals with similar health status
• Annual renewal premium rates will be determined
  not by your individual claims, but instead by the
  claims experience of the entire rating class pool
  
• Some States will use a Block renewal in which the
  claims experience of the product selected versus
  your individual claims

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Regulatory Impact
Varying regulatory climates can have a profound
impact on insurance affordability. Consider the
differences in individual rates for two
30-year-old males living in a Philadelphia suburb
located across the bridge from each other in
different states.
September 2007 Lowest and Highest Rates for PPO
Indemnity Plans 1000 Deductible 80/20
Coinsurance In Neighboring Philadelphia Suburbs
NJ
PA
599 - 6,009 Haddonfield, NJ 08033
70 - 260 Wayne, PA 19087
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• Small Group
• Health Insurance

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In the beginning was HIPAA
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HIPAAs Changes

• Small group is 2-50 employees
• Guaranteed issue
• Guaranteed offer of all plans
• Guaranteed renewability
• Portability for employees
• Continued access at the markets rate

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What is the Market Rate?
Other Administrative Costs 9
Taxes 4
Claims Cost 87
Centers for Medicare Medicaid Services, 2007
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Pure Community Rating
425
FACTORS Benefits Location Family size
425
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Modified Community Rating
650
650
ADDITIONAL FACTORS Age Sex Industry Group size
200
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Rating Bands
1.50
1.25
1.10
- .90
- .75
- .50
or 50
or 25
or 10
67
22
200
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A POOL
IS A POOL
IS A POOL!!!
IS A POOL!
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Participation and Eligibility
Most of the group must participate
You must be a member of the group
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How Small Businesses Select Coverage
HMO or PPO or Indemnity?
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Which Plan Is Best For Me?Premium Contributions
Dont Forget Out-of-Pocket Expenses
Employer Contribution
EO 325 ES 650 EC 650 EF 725
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• Large Group
• Health Insurance

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Who Buys Large Group?

• Private sector Employer Groups
• Governmental Employer Groups
• Customary size threshold
• Fully Insured 51 Employees
• Self Funded 100 Employees

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Fully Insured Group Plans

• Traditional Insurance Carriers
• National and Regional
• Customized plan design
• Multiple plans, networks and or carriers
• Managed Care and Plan Design
• Health Maintenance Organization
• Preferred Provider Organization
• Exclusive Provider Organization
• Indemnity Plans
• Consumer Driven Health Plans

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Fully Insured Group Plans

• Insured Funding Arrangements
• Traditional Insurance
• Experience Rated
• Minimum Premium
• State Insurance Regulation
• Mandated Benefits
• New and Renewal Rate Calculation
• Under 300 Blend of Manual, Demographic and
  Experience Pricing
• Over 300 Actual Claims experience

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Typical Fully Insured Model
Employer Group
Pays Premium
Insurance Company
Managed Care Network

Prescription Drug
Employee or Dependent incurs a medical claim at a
healthcare provider
Claims Administration
Utilization Review
Disease Management


Case Management
Reinsurance Pooling
Healthcare Provider Paid
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Self Funded Group Plans

• Prior to 1974 regulation of self-funded plans
  were state controlled
• ERISA placed regulation with federal government
• Self-funded plans under ERISA avoids state
  regulations including insurance regulation

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.
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Self-funded Group Plans

• Who self funds group plans
• Employer elects custom benefit design
• Employer funds medical claim account
• Employer hires a Third Party Administrator
• Employer purchases stop loss liability insurance
  protection for abnormal risks
• True self-insurance

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Typical Self-funded Model
Managed Care Network
Claims Administration
Pays
Employer
Prescription Drug
Utilization Review
Contributions
Disease Management
Claim Account
Interest Income
Case Management
Refunds claims beyond limits
Pays claims
Transplant Carve Out
Stop Loss Protection
Stop loss
Provider Claims
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Stop Loss Protection

• Specific Stop Loss
• Protects against a single catastrophic claim
• All eligible claims below the individual stop
  loss level are the responsibility of the employer
• All eligible claims in excess of the individual
  stop loss level are reimbursed by the carrier
• Aggregate Stop Loss
• Protects the group as a whole
• Total Claims under aggregate stop level are
  employer liability
• Claims exceeding aggregate stop loss level are
  reimbursed by carrier

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Functions of Large Group Brokers and Consultants

• Strategic Benefit Planning
• Market Review
• Financial Modeling
• Risk Tolerance Analysis
• Health Claims Analysis
• Administrator Audits
• Network Disruption Analysis
• Plan Document Contract Review
• Premium Contribution Strategies

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• Consumerism

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Employee Consumerism
1. Choice
2. Control
3. Health and Wellness
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Cafeteria - Section 125 Plan(Health Care FSA)
Traditional Medical Plan
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Cafeteria - Section 125 Plan(Health Care FSA)

• Features
• Typically employee-funded
• 2 Ps (Pretax in and comes out Pretax)
• No underlying insurance plan design requirements
• Issues
• Employer owns the account
• Claims must be processed and approved
• Use it or lose It

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Why Healthcare Reimbursement?
800
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Health Savings Accounts
High Deductible Health Plan (HDHP)
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Health Savings Account (HSA)(Medicare
Modernization Act of 2003)

• Features
• 3 Ps (Pretax in, earns Pretax and comes out
  Pretax)
• Employee owns the account
• Employee uses the account to pay for any
  out-of-pocket medical expenses as defined in IRC
  213(d)(deductibles, co-payments, and other
  amounts, but not premiums)
• Unlimited rollover from year-to-year (No Use it
  or lose It)
• Unlimited use between family members

• Issues
• Eligibility limits
• Requires a specific insurance plan design (HDHP)
• No First Dollar Coverage except preventive care
• Contribution limits

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Health Savings Account (HSA)

• A HDHP has a deductible not less than 1,150 for
  individual or 2,300 for family coverage
• Annual out-of-pocket expenses do not exceed
  5,800 for individual or 11,600 for family
  coverage. For calendar year 2009, the annual
  limitation on
• HSA 2009 Contributions for an individual with
  self-only coverage under a high deductible health
  plan is 3,000 for an individual with self-only
  coverage or
• 5,950 for an individual with family coverage
  under a high deductible health plan.

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Why Wellness?
Determinants of an Individuals Health Status
Genetics 20
Lifestyle Choices 50
Environment
20
Access to Care 10

• Mercer Management Journal 18, The Case for
  Consumerism in Health Care

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Wellness Programs can include

• Annual health risk assessments to make employees
  aware of their health, conduct interventions and
  evaluate program effectiveness
• Telephonic or face-to-face lifestyle coaching for
  those with risks
• EAP- Employee Assistance Programs
• Onsite Fitness Centers
• Healthy Food Choices (Cafeteria)
• Bio-metric Screening
• Online health wellness tools

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Wellness Programs can include

• Gym Memberships
• Walk Programs
• Fitness programs
• Nutrition programs
• Stress management programs
• Smoking Cessation programs
• Lunch Learn programs
• Children programs

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• Role of the Agent, Broker, or Consultant

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Employee Compensation
Employer

• Financial Needs
• Lifestyle
• Risk Management
• Property and Liability
• Health expenses
• Disability
• Premature Death
• Savings and Investment
• College
• Retirement

Income
.60
1.00
Taxes 40 ___________ Living Exps Pay
Debts Save/Invest
FICA Match Health Life Disability Cafeteria Pensio
n/401k
47
2008 FEHBP

• 27 Medical Plans
• 7 HMO
• 17 FFS (PPO)
• 1 CDP (HRA)
• 2 HDP (HSA)
• Savings Plans
• Flexible Spending Accounts
• Health Reimbursement Accounts
• Medical Savings Account

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Which Plan Is Best For Me?
1.
2.
3.
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(No Transcript)
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7 HMO Plans
Out of Pocket 1,750
Unlimited Maximum
HMO Plan
Member Responsibility Copays
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17 FFS (PPO) PlansIn-Network
Unlimited Maximum
Maximum Out of Pocket Deductible
300 Coinsurance 4,200 Maximum 4,500
FFS Plan
Member Responsibility
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2 PPO HSA PlansIn-Network
Unlimited Maximum
Maximum Out of Pocket Deductible
2,000 Coinsurance 1,000 Maximum
3,000 Plus Copays Yes
HSA Plan
Member Responsibility
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Which Plan Is Best For Me?
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Which Plan Is Best For Me?
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Employee Compensation
Employer

• Financial Needs
• Lifestyle
• Risk Management
• Property and Liability
• Health expenses
• Disability
• Premature Death
• Savings and Investment
• College
• Retirement

Income
.60
1.00
Taxes 40 ___________ Living Exps Pay
Debts Save/Invest
FICA Match Health Life Disability Cafeteria Pensio
n/401k
56
Questions?