First of all...I'm not selling an association plan to anyone. I'm simply trying to find out if anyone has had experience with or has set up a group benefit (medical) plan for an association? Size? Longevity? Fully insured/Partially self-funded?
I know these things never work because they are so heavily selected against, but I've been asked to do some due diligence by a collegue. A buddy that does med mal is working with a group of Dr.'s on a group med mal case for the association. The docs asked if there was a way to provide discounted HI for the associations members and their employees through some kind of association plan. Less than 100 Dr.'s with probably another 200-300 eligibles. Texas is situs.
I don't think any fully insured carrier will look at it, so partially self-funded is likely the only option. But man, just one or 2 spec claims in the first year and Kabamm! There it goes into the death spiral...
I have some experience with this and Trustmark is the only carrier that I know of that will consider writing it for that size. However, the participation would need to be very high in order to make it work.
MelMunch: CAVEAT: IMHO I don't think you have enough potential members... that being said:
Consider a captive, with up front buy-in from the Association main members... which also acts as a motivator for participation.
Expect Dr offices that KNOW their group is health to ask why they should combine their health employees with the other Dr's Un-healthy ones? Good question that needs a good answer.
You're damned if you do, damned if you don't.... underwrite that is.... open the doors and you'll be wishing you'd never done this.... tighten the UW reins and no one will consider you since health insurance is a hassle anyway and we all know that once a benefit become a hassle, it's no longer a benefit!
That being said, if you can keep the captive, self-funded (notice I said self-funded) rates at least 9-10% BELOW the fully-insured competition (which will near impossible, because they have millions of member and you'll have 300)... then it might fly... but the up-front monies are critical to staving off the lean months that are sure to have you operating at a PMPM loss.... till you get things under control.
Good luck out there
PS: I don't know of anyone that will touch writing a fully-insured product this way, AND keeping it exclusive (as in exclusive to YOU, the agent).... they will offer their street rates, which the Doc's have access to now... so it'll be a "beard" for what they already can find without the association.
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That small a group your best bet is to use individual policies and get an endorsement. Even then, best case scenario is 10 - 15% participation.
I have handled quite a few associations in a past life. You need much bigger numbers to make it work. I had several bar associations, a few dental associations and some blue collar associations. Smallest one had 300 participants. Largest over 1000.
We averaged 20% participation and self funded all of them.
Self funded without any claims experience.
Very scary
Who is going to fund the claims?
In my state there have been a couple of association plans that were self funded that went bust because the people that set them up did not kow what they were doing.
I would look for an already established association plan and see if they could be eligible for that plan.
The problem I see with Association plans is adverse selection. Healthy people leave the plan and sick people stay on.
Self funded without any claims experience.
Very scary
Not if you know what you are doing . . . and we did.
Who is going to fund the claims?
The members.
In my state there have been a couple of association plans that were self funded that went bust because the people that set them up did not kow what they were doing.
Unfortunately, there was quite a bit of that going on. Which is why associations are no longer self funded.
At one time I had the TN Bar, Dental & Medical association, NC bar, S E Lumber Mfg ass'n, FL Auto Dealers, FL Auto Parts Assn and several employee leasing firms (as they were called then) . . . all self funded . . . all profitable until some folks got very greedy.
The problem I see with Association plans is adverse selection. Healthy people leave the plan and sick people stay on.
The problem with most associations is they implode.
Interesting,
So when you set up the self funded plan for the association what specific did you use & what aggregate?(stop Loss) Did you use a TPA?
How did the members fund the claims? Did you use a set equation for how much money they were funding each month? How many members did you have? Did you know any of the claims going into it?
Originally Posted by somarco
Not if you know what you are doing . . . and we did.
The members.
Unfortunately, there was quite a bit of that going on. Which is why associations are no longer self funded.
At one time I had the TN Bar, Dental & Medical association, NC bar, S E Lumber Mfg ass'n, FL Auto Dealers, FL Auto Parts Assn and several employee leasing firms (as they were called then) . . . all self funded . . . all profitable until some folks got very greedy.
The problem with most associations is they implode.
Very interesting
Did you ever have a year where the premium was not enough to fund the claims? With no aggregate that seems to be taking on a lot of risk. I don't understand not having a agg.
On a group of 2000+ you could be looking at $10-$12 million in claims a year maybe even as high as $15-$21 million.
Did the TPA have high admin fees? How did the setup who was going to be in controll of the plan? Board of directors?
How competitve were the rates. Did the rates beat what was aviable on the market for the healthy groups?
The association plan here that was self funded ended up owing about $1.4 million in claims before it went bust.
Groups that size do not need an agg. The spec protects the loss fund.
I did a fair amount of spec only. Agg really only needed under 300 lives.
TPA fees in the $15 range as I recall. Again, this was quite a few yrs ago when we could set up self funded associations without a lot of hassle.
The board hired a risk manager (who was usually the E.D. of the association). Day to day operation managed by the TPA.
A well run association keys off the admin & spec premiums which ran (at that time) 8 - 12%. When you have 88 - 92% of dollars flowing in for claims you have a well run plan that can compete quite handily with fully insured.
What "quality" reinsurer writes cases down to that size anymore? I don't know of one... but I'm a big advocate that you don't self-insure until you hit about 250 employees.... but know ton's of business was written on companies down to 25 employees years back... just not recently....
Companion or someone like that tried it with Covenant TPA here... but haven't heard a peep of them since the introduction....
Been out of the stop loss biz for about 8 years. Don't know who the players are any more.
Lloyds used to write down to 5 lives. I had quite a few cases (mostly in FL) in the 25 - 100 life category.
The numbers work at 100 lives and up if you set it up right.
Safeco, Sun, Great West offered at 50 lives. General American at 25. And there were smaller companies with solid reinsurance behind them (D&H, M&G, Hanover) who were in the business. Zurich was in the market for a while and may still be.
Companion was a minor player but I understand they are still in the business.
I worked the xs business for close to 15 years via an MGU. We worked with all the top intermediaries and reinsurers. Even had our own captive ceding company to take a portion of the risk. The only MGU that was willing to go on the hook which gave us a vested interest in the business we wrote and a leg up on our competitors (of which there were over 300 before it collapsed).
The xs business was a niche market until it got crowded. A lot of money was made then. Fewer players now and a lot of the reinsurers have short memories and don't want to get back in the water.
It is a different world now. Not necessarily better, just different.
Covenant was a relatively small benefits TPA. Their gig was mostly WC. Odd folks over there. Never cared much for them.
Been a few days since I checked the board. Thanks to everyone for their input. I pretty much told my buddy it wasn't going to work. Of course no rep will put it in writing, so I'm stuck just saying..."it won't work"
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