GHDP - All

Methods of Adjusting Manual Base Rates

1) ACA limits allowable rating variables in small group market 2) Claim Probability Distributions (CPD) 2.1) Useful for comprehensive or major med, where there is a deductible, coins, and OOP limit 3) Actuarial Cost Models 3.1) Useful where copays and limits apply to specific services 3.2) Gross benefit cost quoted as PMPM calculated as 3.2.1) 1/12 * annual freq * avg allowed 3.2.2) Reduced by value of any copays 3.2.3) Total net benefit cost PMPM is then derived 4) Using cost models to estimate the impact of plan changes

Benefits Management - Applying Technology

1) A common relational database becomes the respository for census, demographic characteristics, eligibility, and plan info 2) A common relational database removes information silos 3) Info can be accessed by plan participants to check balances, coverages, or pending claims 4) Data-Accessing Capabilities: participants access individualized info without requiring a benefits specialist 5) Security: protect against fraud and unauthorized access to participant info 6) Executive Information Systems (EIS) provide management information in summary format 6.1) Utilization patterns, risk exposures, and factors driving benefit costs 6.2) Imaging and optical storage eliminates paper records 6.3) Access to internet information 6.4) Client server technology integrates networked applications with desktop and mobile tools 6.5) EE self-service allows updating of personal data and benefits

Operational Definition of ACOs

1) A legal entity composed of certified Medicare providers 2) Coordinate care for a defined population of Medicare FFS beneficiaries 3) ACOs meeting quality standards receive payments for shared savings if they can reduce spending growth below target

Shared Savings Payment Methodology

1) ACOs choose between 2 payment tracks 1.1) Track 1: A shared savings only model 1.2) Track 2: share costs ? spending targets as well as any savings when expenditures < target 2) Participation under a one-sided model is limited to one contract term 3) Either track requires baseline expenditure estimates and trend to project spending benchmarks 4) ACOs need to reduce spending below the MSR before being eligible for any shared savings 5) Shared savings and losses percentage: up to 50% or 60% depending on track chosen 6) There is a cap on shared savings and losses

Quality Measures and Measuring ACO Performance

1) ACOs sharing in savings only, share up to 50% 2) For ACOs sharing in losses as well, the percentage is 60% 3) ACOs report on 33 measures grouped into 4 domains 4) Data sources 4.1) Survey instruments 4.2) Claims 4.3) Electronic health record incentive program 4.4) Group practice reporting option tool 5) The EHR measure is double-weighted 6) Avg of domain scores determines the % of shared savings

Pricing Assumptions

1) Admin expenses 1.1) Expenses to develop, sell, UW, administer, and overhead 1.2) Design and development amortized over a number of years 1.3) Pricing on the margin: only expenses directly with product included 1.4) Considerations 1.4.1) How are expenses allocated to the product?; How should admin expenses be allocated to groups?; What does the competition include as expenses in its pricing 2) Commissions and other sales expenses 3) Premium taxes and other taxes 3.1) Premium taxes and other taxes 3.2) Other Taxes - Fed and state income taxes 3.3) Self-insured products do not pay premium taxes 3.4) Other taxes: 2 introduced by ACA 3.4.1) A federal assessment on health coverage (even self-insured) 3.4.2) A comparative effectiveness research assessment 4) Risk and profit charges 5) Investment earning

Voluntary Benefits Advantages

1) Advantages for employers 1.1) Offering more benefits without significant added costs 1.2) Supplement or replace ER sponsored benefits 1.3) Benefits act as EE recruitment or retention tool 1.4) Offering benefits to EEs that meet performance goals 2) Advantages of EEs 2.1) EEs like convenience of benefits through the workplace 2.2) In many cases, benefits are portable so they can take them to a new job 2.3) Advantageous pricing 2.4) Purchase is made through salary reduction

Typical Pharmacy Data Fields

1) Age, Gender, DOB 2) Fill Date 3) Claim ID 4) Prescribing Provider ID 5) Pharmacy Provider ID 6) Drug Name 7) Tier 8) NDC 9) Days Supply 10) Units 11) Allowed Amount 12) Refill Indicators 13) Member and Plan Costs 14) Therapeutic Classes 15) RxCUI 16) GPI

Management Reporting / Management Information Systems (MIS)

1) Allows benefits management to monitor financial results, utilization, risk exposures, deviations from compliance targets 2) PPACA - Need to compile actuarial data to determine whether their health plans comply 3) Measure program costs and quality

How to Apply the Functional Approach Analyze Benefits Presently Available AND Consider Cost-Saving Techniques

1) Analyze benefits presently available 1.1) Types of benefits 1.2) Levels of benefits for each categories of needs 1.3) Probability periods create gaps in coverage 1.4) Eligibility requirements 1.5) Employee contribution requirements 1.6) Flexibility available to employees 1.7) Actual employee participation in benefit plans 2) Consider cost-saving techniques 2.1) Changes in benefit design 2.2) Reduction of benefits 2.3) Flexible benefits 2.4) Managed care 2.5) Utilization review 2.6) Disability management 2.7) Wellness programs 2.8) Change insurers 2.9) Self-fund

Retrospective Experience Rating

1) Balance = Prior balance + prem + Investment - claims charged - expenses - risk charge - prem stabilization reserve addition - profit 2) Claims charged = Clms paid + clm res increase - pooled clms + pooling charges + conversion charges + clm margins 2.1) Specific stop-loss claims are removed 2.2) Claims > aggregate stop-loss pooling level are removed 2.3) Stop loss pooling charge is added back in 2.4) Add in excess claim cost for conversion privileges 3) Premium stabilization reserve addition: reduce risk of being in deficit by accumulating portion of policyholder surplus 4) Profit: margins often built into other assumptions, rather than shown explicitly

Strategies for Improving ACO Incentives (2/2) Yardstick Competition

1) Benchmark is based not only on the organization's own past performance but also on the performance of other providers 2) Advantage: Rewards efficiency even if an ACO was unable to improve on its own past performance. Gives efficient providers incentive to enter and remain in MSSP 3) Disadvantage: Inefficient providers receive a lower benchmark than the current ACO model making them less likely to participate; efficient providers receive higher benchmarks than the current model and get rewarded for simply maintaining status quo 4) another approach: an ACO's benchmark under the current rules could be blended with a local benchmark 5) Risk-adjusted to minimize unfair penalties for ACOs that serve sicker patients

Benefits Director Proficiencies

1) Benefits Plan Design 2) Benefits Plan Delivery 3) Benefits Policy Formulation 4) Communications 5) Applying Technology 6) Cost management and resource controls 7) Management reporting 8) Legal and regulatory compliance 9) Monitoring the external environment

2 Methods for Turning Claim Costs into Gross Premiums

1) Block Rating (Short Time Horizon) Approach 1.1) Annual claim costs are calculated 1.2) If claim cost based on average demo profile, adjust for any changes 1.3) N = net premium 1.4) E^N = expenses that are % of net 1.5) E^F = fixed expenses 1.6) E^G = Profit and expenses as a % of gross prem 1.7 = G = gross prem = N * (1+E^N) + E^F / (1-E^G) 2) Asset Share Approach 2.1) Calculation done for representative rating cells 2.2) Policy year basis or calendar year 2.3) Asset share's elements 2.3.1) Exposure Values such as policies sold 2.3.2) Revenue values 2.3.3) Claim values 2.3.4) Level of capital 2.3.5) Expense and Profit targets

Reasons for the Growth of Employee Benefit Plans

1) Business Reasons 1.1) Attract capable employees 1.2) To retain current employees 1.3) Corporate efficiency, productivity, and improved employee morale 1.4) Employees' welfare and social objectives 2) Collective Bargaining 3) Favorable Tax Legislation 4) Efficiency of the Employee Benefits Approach 5) Limitations on the size of wage increases 6) Various legislative action 7) Benefits integrated with governmental benefits

Organizations are Using Bundled Payments for Following Purposes (aka Advantages)

1) By Providers 1.1) To gain the cooperation of physicians to reduce hospital cost 1.2) Opportunities for reducing expenses 1.3) Improving delivery system integration 1.4) Gain-sharing between the hospital and physicians 1.5) Increasing profit margin 1.6) Increasing patient volume 2) By Payors 2.1) Reduce payments for services within the bundle 2.2) Encouraging patients to use lower-cost, higher quality providers

Monitoring ACO Performance and Procedures for Terminating Agreements

1) CMS monitors ACOs beneficiary complaints, quality data, site visits, audits 2) CMS will terminate and agreement with an ACO for any of the following: 2.1) Noncompliance with eligibility and other requirements 2.2) Sanctions against the ACO by an accrediting org. or govt. that leads to inability of the ACO to comply with SSP 2.3) Violation of physician self-referral prohibition, anti-kickback statute, antitrust laws 3) ACO providers previously expelled can reapply, but need to wait until end of the original 3 year period

Medicare SSP Data Sharing

1) CMS will provide aggregated reports on the ACO population 2) CMS will make available beneficiary identifiable data 3) ACOs able to receive claims data on a monthly basis 3.1) Data covers Medicare Part A, B, and D costs and util 4) Medicare beneficiaries will be assigned to ACOs based on where they receive services for the most recent 12 months

LTD - Optional Benefits

1) COLA (cost of living adjustment) 2) Survivor Benefit 3) Expense reimbursement 4) Pension benefit 5) Portability 6) Conversion Option 7) Spousal benefits 8) Catastrophic benefits

Prospective Experience Rating

1) Changes in the premium to be charged for a future period 2) Incurred Claims = Paid Claims + Ending Res - Starting Res 3) Pooling Methods 4) Trending midpoint of experience to midpoint projection 5) Calculating the gross rate from the net rates 5.1) Expense loadings (also known as retention loadings/items) 5.2) Include ACA fees: insurer fee, transitional reinsurance fee, patient centered outcomes research trust fund fee 5.3) Deficit recovery charge 5.4) Termination risk charge 5.5) Pooling charges 5.6) Profit charge 5.7) Investment income 5.8) Explicit margin

Strategies for Improving ACO Incentives (1/2) Modifying the Benchmark Weights

1) Changing to equal weights across the 3 years used to calculate the benchmark 1.1) Reduces the incentive to increase spending in the last year 1.2) It makes incentives consistent across the years of a contract period 1.3) Since there are no shared losses before the group enters a contract for the first time, some incentives remain for any given weight distribution 2) Calculating the benchmark using more years 2.1) For example, use benchmark weights of 1/5 for 5 years 2.2) this penalizes cost savings less for efficient ACOs and encourages ACOs to renew their contract 3) CMS could defer the rebasing of ACO benchmarks 3.1) Savings in the previous contract period would not be penalized by a lower subsequent benchmark

New Business UW for Large Groups

1) Characteristics of the group: Age and gender, area, industry, financial stability, ease of admin, level of participation, carrier persistency 2) Larger employers often opt for self-funded ASO contacts 3) Little emphasis on health status of individuals 4) HIPAA requirements 5) ACA promotes access and consumer choice 6) Plan design

How to Apply the Functional Approach

1) Classify employee needs 2) Classify categories of persons 3) Analyze benefits presently available 4) Determine gaps in benefits and any overlapping benefits 5) Consider recommendations for changes in present plan 6) Estimate costs for each recommendation 7) Evaluate methods of financing 8) Consider cost-saving techniques 9) Decide on appropriate benefits and financing methods 10) Implement changes 11) Communicate changes to employees 12) Periodically reevaluate

Eligibility Reqs to Participate in the Medicare SSP Integrity Requirements

1) Compliance must include: 1.1) A lead compliance official who reports to the governing body 1.2) Mechanisms for identifying compliance problems 1.3) A method to report suspected problems 1.4) Compliance training 1.5) Report suspected violations to the law enforcement agency 2) ACO must have a conflict of interest policy 3) CMS screens for program integrity issues 4) Prohibited from utilizing preferential referrals 5) Prohibited from providing gifts as inducements for receiving services

Employee Benefits Program What Influences Complexity of Program

1) Comprehensiveness of benefits design 2) EE group size 3) Program uniformity across different EE categories 4) EE geographic dispersion 5) Existence of self-funded or self-administered arrangements

Group Universal Life Insurance - Types of Plans

1) Consist of term life insurance and a side fund that accumulates with interest 2) Death benefit equals the term life component plus the side fund 2.1) Level benefit: term amount decreases as side fund grows 2.2) Increasing benefit: term amount fixed as side fund grows 3) GUL premium 3.1) Prem credited to the fund net of prem tax, expense charges, and term cost 4) Credited interest rate is set by the insurer annually. There may be a guaranteed min rate

Benefits Plan Delivery Critical Activities AND Activities Vary Depending On

1) Critical Activities 1.1) New EE orientation 1.2) Policy clarification on benefits eligibility, coverage, and applicability of plan provisions 1.3) Dealing with exceptional circumstances and unusual cases 1.4) Processing enrollment data, claims info, and plan distributions 1.5) Benefits counseling - responses to EE inquiries including termination and retirement and forms of leave 2) Activities vary depending on 2.1) Activities vary depending on benefits program scope 2.2) Dependent upon the nature of the organization 2.3) Dependent upon EE workforce characteristics

Considerations in Contracting for Bundled Payments

1) Defining the episode 1.1) The bundled episode must be clearly defined 1.2) What is the trigger or index date and when does the case end 1.3) Which services are included 2) Evaluating catastrophic risk 2.1) An outlier risk analysis can evaluate financial risk to sponsoring organization 2.2) Consider variation in length of stay, probability of serious complications, expected losses beyond margin 3) Financial stability for low case loads 4) Determining provider allocation funds 5) Distinguishing case severity 6) Quality outcome requirements 7) Admin complexity 8) Risk Sharing alternatives 9) Potential for increased utilization

Group DI Provisions

1) Definition of Disability 1.1) Disability depends on insureds inability to perform occupational duties 1.2) Own occupational definition 1.2.1) More generous 1.2.2) Makes it easier to qualify for DI benefits 1.2.3) After EE disabled for some time, use any occupation definition 1.3) Partial, residual, or loss of earnings definition: allow someone working part-time to qualify for DI benefits, reduced by their work earnings 2) EP, BP 3) Benefit Amounts 3.1) A % of pre-disability earnings (such as 60%), not to exceed a max 3.2) EE-paid prem results in a higher % of after-tax income being replaced 3.2.1) Employer-paid prem result in taxable benefits 3.2.2) EE-paid prem result in tax-free DI benefits 4) Benefit offsets 5) Limitations and Exclusions 6) Optional Benefits

Advantages of Group Technique

1) Designed to prevent adverse selection 2) Only certain groups eligible term-0 3) Steady flow of lives through the group 4) Minimum number of persons in a group 5) Minimum participation 6) Eligibility requirements 7) Max limits 8) Automatic determination of benefits 9) Efficient admin

Manual Claim Table Adjustments

1) Disability Factors 2) Effective Date Adjustment 3) Industry Factors 4) Regional Factors 5) Lifestyle Factors 6) Marketing Considerations 7) Contributions: if 100% ER paid, antiselction minimized 8) Case Size factors and Volume Adjustments 9) Plan Options: Usually completely paid for by EE 9.1) Imperative that age-rated approach be used

Allowed Amount Components in Pharmacy Costs

1) Discounted IC 2) Disp. Fee 3) Vaccine Fee 4) Sales Tax

Voluntary Benefits Excluded from ERISA if 4 Requirements Are Met

1) ER does not make any contributions 2) Participation in the program is completely voluntary 3) ERs sole functions with respect to program are: 3.1) Permit insurer to publicize program 3.2) Collect premiums 3.3) Remit premiums to insurer 4) ER receives no consideration (cash or otherwise) other than for admin services rendered

Steps to Purchase LTD in Private Exchange

1) ERs establish pretax payroll deductions defined contribution plans (such as Section 125 cafeteria plans) 2) Insurance plans available to EEs are selected by ER in advance 3) EEs choose whether or not to get coverage

Basic Group Term Life Insurance - Plan Provisions

1) Eligibility Provisions 1.1) Usually full time EEs working more than a minimum number of hours 1.2) Actively at work requirements 1.3) Contributory plans typically 75% minimum participation 1.4) Evidence of insurability for large amounts 2) Continuity of coverage provisions and conversion rights 2.1) Insured's right to convert group term ins. to ind upon term of employment 3) Disability Provisions 3.1) Waiver of premium 3.2) Total and permanent disability 3.3) Extended death benefit 4) Benefit Payment Provisions 4.1) Benefits payable to beneficiary designated by insured 4.2) Employer may not be named as beneficiary 4.3) Settlement options: lump sum, monthly installment, money market account 4.4) Accelerated benefits provisions for terminally ill 4.5) Viatical assignment: certificate holder sells their group coverage to 3rd party for actuarial PV

Group Universal Life Insurance - Plan Provisions

1) Eligibility provisions are similar to group supplemental 2) GUL continuity of coverage approaches: 2.1) WOP may apply to term portion 2.2) Portability provision similar to supplemental life plans may apply 2.3) Accumulation fund may be used to purchase paid-up insurance on retirement of termination 2.4) Coverage may continue on a non-premium paying basis, with monthly term costs withdrawn until fund exhausted 2.5) Conversion privilege may be provided 3) Death benefit payment provisions 3.1) Similar to group term life 3.2) Fund may be paid out as a surrender or a policy loan

Eligibility Reqs to Participate in the Medicare SSP 1. Eligible Providers 2. ACO Must Establish a Governing Body

1) Eligible Providers 1.1) Professionals in group practice arrangements 1.2) Networks of individual practices 1.3) Joint venture arrangements between hospitals and professionals 1.4) Hospitals employing professionals 1.5) Critical access hospitals 1.6) Rural health clinics 1.7) Federally qualified health clinics 2) ACO must establish a governing body 2.1) Governing body composed of participating providers and beneficiaries 2.2) Community representation on the board is encouraged 2.3) The ACO participants must have greater than or equal to 75% control of the governing body

Overall Employee Benefit Concerns

1) Employer and Employee objectives 2) What benefits should be provided 3) What should be covered 4) Should employees have options 5) How should plans be financed 6) How should the plan be administered 7) How should the plan be communicated

Large Group Renewal UW

1) Evaluating the case: change in enrollment, antiselection, catastrophic claims, admin 2) Developing renewal recommendations 2.1) Present new premium rates for the existing program 2.2) may propose alternate funding methods or plan design changes 3) Renewal monitoring - review claims and incurred but unreported liabilities

Medicare Shared Savings Program One-Sided Model Characteristics

1) Max sharing rate: up to 50% 2) Quality scoring: up to 50% of shared savings is conditional on quality performance 3) MSR: Varies by population size 4) MLR: N/A 5) Max sharing cap: payment capped at 10% of ACOs benchmark 6) Shared Savings: 1st dollar sharing once MSR is met or exceeded 7) Shared Losses: None 8) Loss Sharing Limit: None

Benefit Plan Design Factors Affecting Benefit Plan Design AND PPACA Health Care Reform

1) Factors affecting benefit plan design 1.1) Cost considerations and EE needs 1.2) Organizational culture 1.3) Historical development of benefits programs 1.4) Industry trends and competition 1.5) Local market conditions for service providers 1.6) Collective bargaining agreements 1.7) Negotiations between labor management 2) PPACA Health Care Reform 2.1) Mandates that individuals attain health coverage 2.2) Restructures plan offerings by insurers and plan providers 2.3) Includes tax incentives and subsidies for coverage affordability 2.4) Individuals select plans through state exchanges if offerings are more attractive than ERs plan 2.5) Such alternatives make ER plan design more complex 2.5.1) Must consider tax and market-place contexts 2.5.2) EE benefits versus ER risk

Basic Group Term Life Insurance Federal Income Tax Implications AND Regulatory Considerations

1) Federal Income Tax Implications 1.1) Prem paid by ER deductible on ER's income tax in US and Canada. Applies to most life and AD&D 1.2) Benefits Excludable from the beneficiary's gross income in US and Canada 1.3) Taxable Income to Employees 1.3.1) In US, EEs are taxed on the value of ER provided group term > $50,000 1.3.2) First $50,000 is received tax-free 1.3.3) In Canada, ER payments life insurance is taxable 2) Regulatory Considerations 2.1) Federal Regulations 2.1.1) Grp term life is subject to many provisions of ERISA 2.1.2) Any age related reductions in coverage be actuarially cost justified 2.2) State and provincial regulation 2.2.1) Do not permit individual selection of the face amount 2.2.2) Max EE contribution requirements 2.2.3) Min participation requirements 2.2.4) Other regulations based on NAIC model laws may apply

Group Supplemental Life Plans Federal Income Tax Implications and Regulatory Considerations

1) Federal Income Tax Implications 1.1) Taxable Income to Employees 1.1.1) EE-pay-all avoids imputed income consequences 1.1.2) Advantageous for basic and supplemental group life programs to be treated as separate plans 2) Regulatory Considerations 2.1) If the basic group term plan meets state minimum participation requirements, then supplemental plan's participation can be less

Advantages of the Functional Approach

1) First, employee benefits very significant element of total compensation 2) Second, employee benefits a large labor cost for employers 3) Third, determine overlapping benefits and gaps in benefits 4) Fourth, keep benefits current, competitive, and in compliance with regulations 5) Finally, so various benefits programs can be integrated properly

Basic Group Term Life Insurance Types of Plans

1) Flat Dollar plans 2) Multiple of Earnings plans 3) Salary bracket plans 4) Position Plans (insurance amount based on EE category) 5) Many plans include age related reductions 5.1) Reductions must be actuarially cost justified under the ADEA

5 Rerating Steps

1) Gather experience 1.1) Inc claims and earned premium rather than paid claims and prem received 2) Restate experience 2.1) Express past experience on current rate level 2.2) DI and LTC: discount claims to incurred period and include change in policy reserves in numerator 3) Project past results 4) Compare the projection against desired results 4.1) Needed rate change = projected loss ratio / desired loss ratio - 1 5) Apply regulatory and management adjustments 5.1) Minimum LR standards over the future and entire lifetime

UW Group DI and Group Life

1) Group DI 1.1) Disability claims are subjective and volatile 1.2) Groups are classified by occupation and industry 1.3) Over-insurance must be avoided 1.4) Firms with a history of employment fluctuation are higher risk 1.5) Non-contributory plans are desirable 2) UW Group life 2.1) Experience rating is usually based on several years experience 2.2) Consider additional risks if benefits in retirement or terminal illness benefit

Evaluating Large Group Experience by LOB

1) Group life: volatile due to low frequency and variations in amounts of coverage 2) DI may also have low claim frequencies, but large liabilities 3) Medical plans 3.1) For large groups, one year of experience is adequate 3.2) Consider discounts, cost containment programs, service area, network size, ease of access, projected enrollment, provider reimbursement 3.3) Multiple choice scenarios 4) Wellness: hard to measure impact of wellness and DM 5) Dental and vision plans: large anti selection risk; cost sharing, frequency limits, exclusions, and participation requirements 6) Medicare Part D: ACA made attractive to ERs offering retiree coverage 6.1) Part D design will become richer 6.2) Govt. secured a 50% discount on brand drugs on Part D formulary 6.3) RDS alternative less attractive since RDS no longer tax exempt

Reasons for Experience Rating

1) Groups prefer premium based on own experience rather than pooled 2) May help insurer quote more competitive rates 3) Competitive pressures despite theoretical justification to pool 4) Policyholder held financially accountable for its past claims experience

Describe Manual Premium Tables and Manual Claims Tables

1) Manual Premium Tables 1.1) Rates include average expenses and profit 1.2) Fully-pooled: adjust manual rate for size, margin, risk, profit, and expense if different than standard 1.3) Large groups; combine manual rate and group's own experience 2) Manual Claim Tables 2.1) Fully pooled: calc manual claim rate, add expense, risk and profit, margin 2.2) Larger groups, combination of manual claim rate and group's own experience 2.3) Manual claim tables show expected monthly claim for each age and sex

Rate Setting Process Considerations

1) Market 2) Existing Products 3) Distribution System 4) Regulatory Situation 5) Strategic Plan and Profit Goals

Benefit Policy Formulation Considerations

1) Human resource questions and issues such as: 1.1) Denial of claims by a carrier 1.2) Confusion over waiting periods 1.3) Service areas of a managed network 1.4) Whether or not a new medical procedure will be covered 2) Many benefit functions are contracted out to insurance carriers and TPAs

What Factors Influence EE Choice

1) Inertia 2) Plan provisions and cost 3) EE and dependent demographics 4) ER actions and attitudes 5) Eligibility for other health insurance coverage 6) Information available about options 7) Provider network attributes 8) Insurer and admin issues

Group Life: Group Risk Selection Considerations

1) Insurance should be incidental to group's existence 2) Selection Controls: eligibility, ben design, rate structure, minimum participation 3) Plans provide flat amount, multiple of earnings, schedule of amounts 4) require EE be actively at work on date effective 5) New EEs not eligible until complete a waiting period 6) For medium and large group offered without evidence of insurability 7) Individual underwritten for high amounts, late entrants, small groups

CMMI Bundled Payments for Care Improvement Initiative

1) Invites organizations to apply for bundled payments for Medicare beneficiaries 2) 4 bundled payment options available. They vary in: 2.1) Services included (inpatient, post-discharge, or both) 2.2) time frames covered 2.3) Whether payments are on prospective or retrospective basis 3) Providers bear risk for costs greater than the fixed bundled fee, but may be paid the difference if FFS payments come in under promised budget

Long Term Disability (LTD) - Benefit Offsets

1) LTD benefit offset by other income to ensure the sum not > pre-DI earnings 2) Integration with Social Security treated in a variety of ways 2.1) Only the primary SS benefit may be deducted 2.2) Any family SS benefits may be deducted 2.3) All sources integration: the primary and family SS benefits deducted if DI benefit + SS > some income percentage 3) Advantages of disabled individual receiving SS benefits 3.1) Reduces cost of the insurance program for the ER 3.2) EE receives higher income replacement since SS benefits aren't fully taxed 3.3) Allows continued SS credits for the individual 3.4) Qualifies the disabled person for Medicare benefits 4) Methods to reduce LTD benefits by disabled EE's earnings 4.1) Proportionate loss formula: % of lost work earnings is applied to the benefit amount 4.2) 50% offset: benefit reduces by $1 for every $2 of earnings 4.3) Work incentive benefit: ignores earnings during an initial period unless earnings + benefits > 100% of pre-DI earnings. At that point, benefit reduces dollar for dollar by the excess amount

Developing the Large Group Proposal

1) Large group RFPs are lengthy 2) Consider plan design, funding arrangements, and enrollment patterns 3) Charges for admin expenses case-specific 4) Performance guarantees: speed and accuracy of claims processing and customer service 5) Funding alternatives: fully-insured, self-funded, combo approach

Group Specific Adjustments

1) Large groups based on group's own experience 2) Adjustments made for new business discounts 3) Economies of scale jumbo groups in enrollment, billing, and admin 4) Self-insured loadings based on cost of administrative services and stop-loss

Eligibility Reqs to Participate in the Medicare SSP 3. Legal Entities 4. Leadership and Management Structure

1) Legal Entities 1.1) ACOs must be a legal entity such as a: 1.1.1) Corporation, partnership, limited liability company, or foundation 1.2) It must be capable of 1.2.1) Receiving and distributing shared savings 1.2.2) Repaying shared losses 1.2.3) Ensuring its providers comply with program requirements 1.2.4) Performing ACO functions identified in the statute 2) Leadership and management 2.1) Operations are managed by an executive who certifies all ACO participants report on quality, cost 2.2) Clinical management by a medical director who is a board certified physician 2.3) Providers make a commitment to the ACO's clinical integration program

Voluntary Benefits Types of Voluntary Benefits

1) Life insurance: group term, supplemental life, and dependent life 2) LTD and STD 3) Dental and Vision 4) LTC 5) Adoption assistance 6) AD&D 7) Legal services plan 8) Critical care insurance 9) Cancer insurance 10) Hospital indemnity 11) Travel accident 12) Travel interruption 13) Student medical

Medicare Shared Savings Program Two-Sided Model Characteristics

1) Max sharing rate: up to 60% 2) Quality Scoring: up to 60% of shared savings conditional on quality performance 3) MSR: Flat 2% 4) MLR: Flat 2% 5) Max sharing cap: payment capped at 15% of benchmark 6) Shared Savings: 1st dollar once MSR is met or exceeded 7) Shared Losses: (1 - final sharing rate) * 1st dollar losses once MLR exceeded; shared-loss rate <= 60% 8) Loss Sharing Limit: Cap on the amt of losses to be shared is phased in over 3 years starting at 5% in yr 1, 7.5% in yr 2 and 10% in yr 3

Common Multiple-Choice Scenarios

1) Medical coverage vs. no coverage: creates antiselection 2) Choice between employer's plan and other available coverage 3) Choice based on member cost sharing 4) Choice based on provider networks or medical management 5) Choice based on prescription drug formularies 6) Choice among insurers 7) Optional riders added to core coverage 8) Consumer directed plans vs. traditional plans

Policy Reserve Considerations

1) Medical rerating absence of policy reserves 2) DI and LTC carry substantial policy reserves 3) Don't compare actual loss ratio without policy reserves against expected lifetime loss ratio 4) Net level premium constant over life of the policy 5) A:E analysis be consistent: with or without policy reserves 6) Additional morbidity recognized at time of rate increase, treated as though a separate benefit 7) Separate stream of policy reserve factor calculated and added to reserve factors already calculated

Medicare ACE Demonstration

1) Medicare 3-year demonstration program bundling acute care episodes 2) Involved competitive bids for select inpatient procedures 3) Medicare shares its savings with the participating sites as well as with patients

Data for Analyzing Bundles

1) Most of the data available represent the payor's cost rather than the provider's cost 1.1) Reimbursement data is very useful for bundles 1.2) A provider needs to know how much payors pay for full scope of services 2) When it comes to reducing cost, payor reimbursement data has less value 2.1) Hospitals with cost accounting systems can best model the potential savings within their own walls

Why Offer Choice if it Costs More

1) Multiple Choice cost is > single choice environment 1.1) individuals minimize their costs at the expense of the insurer or ER 1.2) Less economy of scale and negotiating leverage 1.3) Communications more complex and admin expenses greater 2) Positives for insurers and ERs 2.1) Introducing a new option 2.2) Taking advantage of favorable selection 2.3) Encouraging consumerism 2.4) Implementing a defined contribution concept 2.5) Offering choice distinguishes an ER as leading-edge

Developing a Manual Claim Table (2/2)

1) National Studies 1.1) 2013 SOA Study 1.1.1) Excluded: grp UL, conversions, dependent, mass-marketed, reins assumed 1.1.2) Results for two types of disability 1.1.3) Waiver incidence rates 1.2) Canadian Institute of Actuaries Studies 1.2.1) Experience on number of lives and amounts insurance 1.3) Use of Actual to Expected or Tabular Ratios 1.3.1) Expected claims may not reflect all variables 2) Population Statistics 2.1) Mortality in general population higher than group plans. Reasons: 2.1.1) Flow of healthy into group, aged and impaired drop out 2.1.2) Employees pass physical exam at many companies 2.1.3) Actively at work and waitin gperiods are required 2.1.4) Individual medical underwriting required for certain risks 2.2) Useful for estimating improvements in mortality, ratios between sexes and ages, rates for dependents and retirees

ACA Program Design Considerations

1) Plans offered by large ERs must meet minimum value: AV must be at least 60%; Certain classes of benefits must be covered 2) Plans must allow the EE the option to cover dependents 3) ACA imposes maximum waiting periods; UW should consider the risk shorter waiting periods creates 4) The plan must be affordable to avoid penalties 4.1) Affordable costs the EE less than 9.5% of their income for EE-only coverage 4.2) In reaction to penalties ERs have directed more premium subsidization towards single coverage and away from dependent converage 4.3) UW should consider implications that changing ER subsidization policies have on the groups expected claims 5) Cadillac Tax 6) Public exchanges 7) Private exchanges

Prospective Experience Rating Pooling Methods

1) Pooling charge must be >= claim modifications made 2) Catastrophic claim pooling 3) Loss ratio/rate increase limits 4) Credibility weighting 4.1) Pooled claims = C * Inc Claims + (1-C) * Expected inc Claims 4.2) Loss ratio (Pooled) = C * LR before pooling + (1-C) * Pooled LR 5) Multi-year averaging 5.1) Pooled loss ratio in year Z = (5*LR in year Z + 3* LR in Z-1 + 1*LR in Z-2) / 9 6) Combination. Many of the methods can be used together

Developing a Manual Claim Table (1/2)

1) Problem is finding appropriate group experience 1.1) Use SOA studies, own experience, population stats 1.2) Limits: treatment of DI and accidental death, combined MF 2) Company Experience 2.1) Best source of mortality 2.2) Published table can be basis for graduation 2.3) Carriers vs. intercompany experience for assessing business 3) Changes in Mortality 3.1) Analyze changes in population mortality or own experience 3.2) 2013 study; improvements over 1% a year 3.3) Increase longevity may replace death claims with disability

Eligibility Reqs to Participate in the Medicare SSP ACO Must Provide Its Plans To:

1) Promote evidence based medicine 2) Promote beneficiary engagement 3) Report on quality and cost metrics 4) Coordinate care 5) Patient centeredness 5.1) A beneficiary care survey 5.2) Patient involvement in ACO governance 5.3) Identify high-risk individuals and individualized care plans 5.4) Coordination of care 5.5) Communicating clinical knowledge to beneficiaries 5.6) Allow beneficiaries to access their medical record

Public and Private Exchanges

1) Public exchanges 1.1) EEs may leave ER coverage to see out coverage on the individual public exchange 1.2) UW should consider the changing demographics of groups due to the public exchange alternatives 2) Private exchanges 2.1) Private exchanges have insurers offer similar benefits and allow choice between plans and insurers for EEs 2.2) Creates antiselection risk that the UW must consider

Manual Premium Rates

1) Rating Characteristics (prior to ACA): Age, gender, health status, rating tiers, geographic, industry codes, group size 2) Rating tier choices 3) Marketing, competitve, and Regulatory issues 3.1) ACA introduced federal rating restrictions

Benefits Management - Cost Management Resource Controls

1) Reasons for benefits mgmt role in fiscal responsibility 1.1) Plan costs represent a significant portion of total compensation 1.2) Compliance issues, such as FAS 106 requirements 2) Benefits Director Responsibilities 2.1) Question actuarial assumptions that vary from plan experience 2.2) Evaluate reserve requirements 2.3) Understanding negotiate retention, interest, and penalty charges 2.4) Design compensation programs capable of recruiting the best workers

Special Funding Arrangements

1) Reserveless plans: Insurer foregoes some prem, and policyholder promises to pay amount upon termination 2) Fully-insured plans: Insurer bears risk of adverse experience, Insureds have security of insurer being the claim guarantor, Contracts subject to insurance laws and premium tax 3) Self-insured plans: ER is the primary risk taker, ACA minimum coverage standards apply to fully-insured and self-insured plans, ER may purchase stop-loss, state regs on insurance contracts will not apply 4) Minimum premium contracts: Hybrid of insured and self-insured plans, Policyholder deposits funds to an account as needed, Clms are paid from fund and insurer liable for clms > expected, state prem tax is avoided 5) Stop-loss contracts: Used with self-insured plans, Specific stop-loss insures claims of ind covered, Aggregate stop-loss covers the claims of the plan as a whole 6) Retrospective premium 6.1) The policyholder takes some claim risk in exchange for reduced risk charges and lower up-front premium

Antitrust Guidelines Conduct to Avoid

1) Sharing competitively sensitive info among the ACO's participants that could be used for services provided outside the ACO 2) Preventing private payers from directing their patients to certain providers 3) Tying sales of the ACO's services to a private payer's purchase of other services from providers outside the ACO 4) Contracting on an exclusive basis with providers 5) Restricting a private payer's ability to provide info to its enrollees to aid in evaluating and selecting providers

Group Variable Universal Life (GVUL)

1) Similar to GUL plans, however under GVUL there are equity and fixed interest investment options 2) Plan provisions of GUL are found in GVUL 2.1) Also, limits on withdrawals and movement of funds among investment options 3) Statutory considerations 3.1) Most state and provincial laws applicable to group term apply to GVUL 3.2) GVUL is considered an investment product as well as insurance and is therefore subject to SEC and NASD regulation

Key Drawbacks of the MSSP Rules for Setting ACO Benchmarks

1) Since the most recent year carries the greatest weight (.6), there are incentives to increase spending in that particular year 2) ACOs with high spending in the year before the start of a new contract are rewarded by elevated benchmark, yielding "savings" even if ACOs don't reduce spending 3) Providers that achieve savings in the year before they enter or renew an ACO contract are penalized by a lower benchmark in the next contract period 4) The benchmark rules create incentives to increase use under Medicare

Group Universal Life Insurance Statutory Considerations and Taxation

1) Statutory Considerations 1.1) Most laws applicable to group term apply to GUL 1.2) NAIC model illustration regulation ensures that illustrations do not mislead 2) Federal Income Tax Implications 2.1) Interest accumulates on tax-deferred basis 2.2) Cash surrender taxable on the gain on surrender 2.3) Death benefit (term plus fund) payable tax free to beneficiary 2.4) If outside of Section 79, no imputed income 3) If savings elements dominate, it is not considered life insurance, and all income immediately taxable

Benefits Management Communications General Requirements to Comply with Federal Law

1) Summary plan descriptions (SPDs) 1.1) Summary of plan provisions in understandable language 1.2) SPD must include: 1.2.1) How a participant can make a claim for benefits 1.2.2) Procedure for appeal if claim is denied 1.2.3) Name and address of person to be served with legal actions against the plan 2) Summary of material modification (SMM) 2.1) A written document that describes any material change 2.2) There is a prescribed time frame 3) Summary annual report (SAR)

Fundamental Pricing: Tabular Method AND Buildup Density Functions

1) Tabular Method 1.1) Used for long term, non-inflation sensitive products, like DI 1.2) Sum of probabilities of claim at each duration, multiplied by cost of that claim 1.2.1) NP = E(Pr(Clmz) * ACz * V^z *lz 1.2.2) ACz = E(Clm) * Continuancez * V^z 1.3) Techniques to model benefits 1.3.1) Monte Carlo simulations 1.3.2) Markov processes 1.3.3) Actuarial commutation functions 2) Buildup and Density Functions 2.1) For inflation-sensitive products 2.2) Buildups 2.2.1) Each category claim cost = claim frequency * Average cost per service 2.2.2) (Frequency of service) * (Copay amount) = (reduction in claim cost) 2.3) Density Functions 2.3.1) Describe total claim of an individual in a year 2.3.2) To calculate impact of deductibles or out of pocket limits, which don't depend on particular service provided 2.3.3) Difficult to deal with copays

Survivor Income Benefits Federal Income Tax Implications

1) Taxability of Proceeds 1.1) Each monthly payment composed of non-taxable portion and taxable interest portion 2) Taxable Income to Employees 2.1) Survivor income benefits in US and Canada considered group term 2.2) May be imputed income on excess of $50,000 exclusion 2.3)Imputed income based on commuted value of expected payments

Dependent Group Life Insurance Federal Income Tax and Regulatory Considerations

1) Taxable Income to Employees 1.1) In US, if amounts < $2,000 benefits are excludable and result in no imputed income to EE 1.2) In Canada, premiums paid by the ER are taxable income 2) Regulatory Considerations 2.1) Some jurisdictions establish a maximum amount of insurance on dependents

Benefits Plan Delivery Quality Standards for Evaluating Customer Service

1) The desired quality as determined by management 2) Standards that ensure the prgoram is in compliance with regulations 2.1) Provide personal benefits statement at least annually if requested by EE 2.2) ERISA standards for responding to request for benefits, to deny claims and respond to appeals 2.3) Make plan financial info available and disclosure mandates for certain plan info 2.4) COBRA notification requirements to terminating EEs on right to coverage continuation 2.5) Certificates of creditable coverage mandated by HIPAA

Underwriting the Small Employer

1) The entity is a licensed employer in the state, has a tax ID, makes social security contributions for employees 2) Participation and contribution requirements for issues outside the open enrollment period 3) Require that the EEs live, work, or reside within the service area of the plan's network 4) EE eligibility requirements as to number of hours, being on the payroll, eligibility class 5) Restrictions on coverage for late entrants

Considerations of Credibility Levels for Experience Rating

1) Theoretical considerations 1.1) Low frequency claims more volatile and require larger exposure for credibility 1.2) Coverages with widely varying claim sizes will tend to be more volatile 1.3) Typical measure is lives covered but may use longer period rather than more lives 2) Practical considerations 2.1) Regulatory restrictions on experience rating for certain group sizes 2.2) Competitive pressures 2.3) Admin ability to cope with experience rating 2.4) Management philosophy regarding experience rating

LTD - Limitations and Exclusions

1) These manage antiselection and avoid administration of subjective claims 2) Special conditions limitation clause 3) Preexisting condition exclusions 4) Other: war, intentional self injury, commission of felony

Measuring Selection and Health Status

1) Traditional age and gender analysis 2) Health risk assessments 3) Risk adjusters 4) Average health risk assessment or risk adjuster score is a measure of selection

Projecting Experience Period Costs to Rating Period

1) Trend: changes in cost per service, utilization, mix of services, provider reimbursement, tech, drugs, plan design 2) Secular trends = percent change from factors affecting 1st dollar, 100% benefits 3) Consider effect of ACA on new rating and underwriting 4) Deductibles and copayments create leveraging

Dependent Group Life Insurance

1) Type of Plans 1.1) Lump Sum benefit to the EE in the event of death of a covered dependent 1.2) Only available when EE group life insurance is in force 1.3) Predominantly EE pay all 1.4) Spouse amounts may be limited to some % of EE amount 1.5) Coverage on children 1.5.1) As a result of health care reform, many plans extend coverage to 26 to be consistent with medical plans 2) Plan Provisions 2.1) Eligibility Provisions 2.1.1) Usually the same as for health coverage, except newborns not eligible until age 14 days 2.1.2) Deferred effective date provision: defers eff. date for dependent currently confined for medical treatment 2.1.3) Spousal coverage may require a medical questionnaire for higher amounts 2.2) Continuity of coverage provisions 2.2.1) Coverage continues only while EEs group term life coverage continues 2.2.2) Conversion rights consistent with EE coverage 2.3) Benefit payment provisions - Beneficiary is usually the EE, and benefits are typically a lump sum

Group Supplemental Life Plans - Types of Plans AND Plan Provisions

1) Types of Plans 1.1) Additional insurance beyond basic group term - EE-pay-all 1.2) Generally a unisex premium. Premium rates vary by 5 year age brackets 1.3) Amounts of insurance a choice of flat amounts or multiples of earnings 2) Plan Provisions 2.1) Generally the same as basic group term life 2.2) Disability provisions limited to WOP 2.3) Min participation lower than basic group term life 2.4) Evidence of insurability requirements more stringent 2.5) Suicide exclusion is common 2.6) Portability provisions for EEs who terminate employment 2.6.1) allow participants to continue group coverage by paying prem directly to insurer 2.6.2) rates applicable to portable lives are typically higher 2.6.3) mortality experience on portable lives significantly worse than on similar active lives, reflecting anti-selection

Survivor Income Benefits Types of Plans AND Plan Provisions

1) Types of Plans 1.1) Provide a monthly payment to the EE's spouse and Children on the EE's death 1.2) Benefit is a percentage of the EEs monthly earnings 1.3) Spouse benefit is payable until, remarriage, attainment of limiting age, or death 1.3.1) Childrens benefit is payable to age 19, or 23 if full time student 2) Plan Provisions 2.1) Eligibility and continuity similar to Group Basic Term Life with 2 differences 2.1.1) Conversion privilege applies to PV of the monthly survivor benefit 2.1.2) Disability provision is limited to WOP 2.2) Benefit payment provisions may include 2.2.1) Guaranteed benefit period 2.2.2) Max benefit period 2.2.3) Remarriage provision 2.2.4) Dowry provision: lump sum benefit payable on remarriage 2.2.5) Social security offset 2.2.6) Last survivor provision

Group Permanent Life Insurance

1) Types of Plans 1.1) Single Premium group paid-up life 1.1.1) Level death benefit for a fixed prem, based on attained age 1.1.2) Includes a level face amount and growing cash value 1.2) Group ordinary life insurance 1.2.1) The group counterpart to individual whole life 1.2.2) A fixed life insurance amount, level premiums, and a growing cash value 1.3) Group term and paid-up plan 1.3.1) Combo of paid-up life paid by EE and decreasing term paid by ER 2) Plan Provisions 2.1) Similar to group term with the following differences 2.1.1) No continuity of coverage necessary for group paid-up insurance 2.1.2) DI provision limited to WOP on the term portion of group term and paid up 2.1.3) Conversion privilege is limited to face amount less cash value for group ordinary life insurance 3) Tax Considerations 3.1) Imputes income based on conservative interest and mortality assumptions 3.2) EE-pay-all may not generate imputed income under certain conditions

Group Accidental Death and Dismemberment (AD&D)

1) Typically a companion coverage to group term life 2) Benefit payable if EE dies as the result of a covered accident 2.1) 50% of benefit if the EE loses a member 2.2) If more than 1 member is lost, then full AD&D benefit is payable 3) Many ERs provide basic AD&D where amount is 100% of basic group life amount 3.1) Supplemental AD&D plans on an employee pay all basis 4) Coverage may be either non-occupational or 24-hour

Small Group Rating Parameters and Structures

1) Under ACA, rate adjustments for health status, group specific experience, gender and other case characteristics are no longer allowed 2) Rating parameters post-ACA 2.1) Age (3:1 ratio) 2.2) Area 2.3) Benefit plans 2.4) MC and negotiated discounts 2.5) Family composition 2.6) Tobacco (1.5:1 limit)

1. Underwriting and Rating Small Groups Under the ACA 2. Factors to Consider to Understand Drivers of Small Group Experience

1) Underwriting and Rating Small Groups Under the ACA 1.1) Essential benefit requirements and standardized benefit tiers 1.2) Elimination of some rating variables such as gender, health status, industry and group size; Eliminated the need for medical UW 1.3) Limitations on the range of allowable rating factors 1.4) Adverse selection will be offset through the federal risk adjustment program 2) Factors to consider to understand drivers of small group experience 2.1) Financial viability 2.2) Industry/occupation 2.3) Group size 2.4) Participation 2.5) Employer contributions 2.6) Prior coverage and experience

Describe Fundamental Pricing and List the Fundamental Methods for Calculating Claim Costs

1) Using tables or claim costs developed through other sources 2) Useful when pricing a new benefit, or if experience is inappropriate or insufficient 3) Own experience preferable to other sources 4) Methods 4.1) Tabular 4.2) Buildup of Density Functions 4.3) Simulation 4.3.1) First develop "expected" value based on whole block's experience 4.3.2) Then expected value modified for information about the individual 4.3.3) Finally, simulate random statistical fluctuation

Benefits Management Communications Why is it Challenging? AND Targeted Communications

1) Why is it challenging? 1.1) Communication challenges: 1.1.1) Workforce is diverse 1.1.2) Some benefits have little EE interest until point of use 1.1.3) Multiple regulatory requirements lead to confusion 1.2) Complexity increases when: 1.2.1) ER offers multiple insurers with differing features 1.2.2) Participant-directed accounts, flex programs, and legal changes 2) Targeted Communications 2.1) Targeted communications must be provided when specific conditions are met: 2.1.1) Benefit statement to terminated vested participants 2.1.2) COBRA rights 2.1.3) Explanation of tax witholding for rollover distributions 2.1.4) Joint survivor information 2.1.5) Certificates of creditable coverage 2.2) Both general and targeted communications are prescribed by law and must occur within noted time periods

How to Collect, Normazlize, and Project Data when Creating Medical Manual Rates (1/2)

Collecting Data for Manual Rates 1) Best source is company's own experience if credible 2) Financial Information 2.1) Define type of claim dollars to be collected; define treatment of reinsurance recoveries and COB recoveries 3) Experience Period: 12 month period ensures a complete seasonal cycle - Claims may be analyzed on incurred or paid basis; incurred basis claims should be completed 4) Exposure basis: # of employees, contracts, subscribers, covered persons 5) Frequency of Data Collection

How to Collect, Normazlize, and Project Data when Creating Medical Manual Rates (2/2)

Normalize Data for Rating Variables 1) Age and Gender 1.1) May adjust historical costs to a standard population 1.2) In the past, manual rate adjusted to reflect group being rated 2) ACA eliminates gender specific rates and restricts premium variation due to age factors to 3:1 for individuals and small groups 3) Geographic Area: Claim costs vary widely 3.1) Company claims lack volume to study by zip code 3.2) Use area factors from competitor or consultant 4) Benefit Plan 4.1) Copayments, dollar maxima for specific benefits, covered services, combinations of copays and coins 5) Group Characteristics 5.1) ACA Allowable: family status, geographic area, age, tobacco use 6) Utilization management programs 7) Provider Reimbursement Arrangements 8) Other risk adjusters based on claim, diagnosis, encounter data, and pharmacy