Level Funded Health Plans

[ABC]

Carriers are coming out of the wood works with a level funded plan design.

This is a self funded plat form with more of a fully insured feel to it.

I am not quite sure how these plan will run. My only experience with these would be with Great West back in the days that did not run well.

The reason these plans are being introduced is because of the future community ratings. These plans will not have to have a community rating. So healthy group should be able to get better rates.

Has anyone had this type of plan in place with a client?
If so did the client get any premium refund? Also how was the rate increase at renewal time? Admin increase or claims funding increase or both?

 

[leevena]

Have used extensively over the years and continue to do so now. Commonly referred to as Agg or Spagg policies, they are self-funded plans that are funded to the maximum. The employer receives a “rate” that is all inclusive (sometimes referred to as a “fully insured rate”) and represents the employers’ maximum liability. Each plan/carrier can structure the plan somewhat differently, so you need to understand the nuances, but overall, these can be a useful and profitable product.
As for the downside, and I do remember Great West debacle, this is a different product requiring more work, underwriting and education to make it successful. While there was plenty of blame to go around with GW (and other carriers), I suspect that many (not all) of the plans that “failed” were due to controllable things, such as; placing it in a group not ready for self-funding, group not understanding their contract (12/12 vs 12/15), etc.

 

[bukev1]

I believe G-W has a 12/27 contract on the run out. The problem was that the fixed costs were so high and took up 50% of the premium in some cases, leaving little room for claims savings, clients also had to renew to get the refund and wasnt paid out untiul 3 months after renewal. Self funding with training wheels but a decent product as an intro vs fully insured.

 

[ABC]

I had one group with Great West with a 2 year run and it turned into a major mess. All the BS about waiving the first months premium.

I have been getting quotes on the level funded plans from a couple of carriers and so far I am not impressed. They are coming in at about 11% over current premium so there is just not enough savings . The plans have to come in at least at the current premium. I am also not sold on the claims funding rebate.

Take a group that is spending $150,000. On a level funded plan they are going to be eligible for a rebate on 1/2 or 1/4 of the $75,000. I just don't see that rebate being big enough. They should be eligible for 75% of the funding.


Now this could all change with community rating.

 

[leevena]

I had one group with Great West with a 2 year run and it turned into a major mess. All the BS about waiving the first months premium.

I have been getting quotes on the level funded plans from a couple of carriers and so far I am not impressed. They are coming in at about 11% over current premium so there is just not enough savings . The plans have to come in at least at the current premium. I am also not sold on the claims funding rebate.

Take a group that is spending $150,000. On a level funded plan they are going to be eligible for a rebate on 1/2 or 1/4 of the $75,000. I just don't see that rebate being big enough. They should be eligible for 75% of the funding.


Now this could all change with community rating.

I agree with you. If the agg/spagg product comes in higher then the fully-insured, it is next to impossible to recommend it not matter what the "refund" possibility is. When the agg/spagg is the same cost, or cheaper, and the group is in the GI market, it becomes a much easier sell.

 

[somarco]

I believe G-W has a 12/27

You may be correct. Never paid much attention to it because it was a joke.

I do recall if you terminated you had to wait an inordinately long time for the final accounting.

All the BS about waiving the first months premium.

Was it waived or deferred?

I recall they offered the plans with a 60 day grace period.

 

[Bruce]

I had one group with Great West with a 2 year run and it turned into a major mess. All the BS about waiving the first months premium.

I have been getting quotes on the level funded plans from a couple of carriers and so far I am not impressed. They are coming in at about 11% over current premium so there is just not enough savings . The plans have to come in at least at the current premium. I am also not sold on the claims funding rebate.

Take a group that is spending $150,000. On a level funded plan they are going to be eligible for a rebate on 1/2 or 1/4 of the $75,000. I just don't see that rebate being big enough. They should be eligible for 75% of the funding.


Now this could all change with community rating.

I worked actuarial and underwriting for a mid-sized mutual before going into sales/sales management. We had a lot of alternative funding business, both ASO with SL as well as FI Alternative funding.

Personally, I think any Fully Insured product that is a Self-Funded "look alike" for anything under 100 Employees is not a good fit. There is just far too much margin built in.

Nothing I see today is worthwhile and compares miserably to what was available 10-15 years ago through true Minimum Premium products or true Experience Rated Agreemnents that broke out pooling charges, expected and max non-pooled claims and admin costs (retention).

We (Trustmark) wrote a ton of this business for 100+ groups, mostly MP for schools/municipalities (many of whom required a FI contract) and Exp Rated for other Employers.

Tmk, Guardian, Principal, etc.... wrote a lot of this before getting shoved out by the majors. Great products, now gone, tho I suppose at 500+ ees, Cigna or Aetna might write a decent contract.

If anyone sees a solid MP with a corridor of 10-25% with deficit forgiveness (or even with deficit carrover) or an Exp Rated contract with margin at or under 5%, I'd love to hear about it for groups under 200.

 

[ABC]

Bruce, you need to post more in the employee benefits forum.

I don't think we will see anything like this from a large carrier. It would destroy their fully insured block.

If anyone sees a solid MP with a corridor of 10-25% with deficit forgiveness (or even with deficit carrover) or an Exp Rated contract with margin at or under 5%, I'd love to hear about it for groups under 200.

 

[junkman]

I've seen self funded plans blow up when sold to under 1,000 members. The agent always says "it's good if you understand the risks" or the employer says "it's worked so far".

Usually the employer doesn't understand the risks that they are now legally the insurer. When it stops working, they're really a mess. One group is completely self funded at 300 lives. They haven't even bought an aggregate.

With any claims driven case renewal calculations are the same - trend claims & add in admin. Blend with manual based on some credibility factor.

My belief is that carriers inherently under or over projecting future claims because of the arithmetic they use. One case Blue Cross said was 100% credible. A simple regression showed that it was statistically only ~ 40% credible. The trick is to find a carrier willing to do something other than what their template says.

Carrier renewal negotiations is one of the most fun parts of the business - especially if you can get another carrier interested.

 

[somarco]

I sold self funded plans (with spec and agg) exclusively for 15 years. Some groups as small as 25 lives, most were in the 80 - 150 life range.

If you know what you are doing you won't have problems.