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Self-Funding and CIGNA Select Solutions
Brian HelmlyRogers Benefit Group
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Innovative funding options
CIGNA offers more funding options for smaller companies than any other national health company.
A fully insured option Two self-funding options
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CIGNA Offers More Funding Options than Any Other Carrier
All dedicated to cost control
RISK : REWARD
Fully Insured LevelFunding
GradedFunding
Fixed Monthly Cost
Participating Contract
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Fully Insured Risk Pooling
High Claims
Low Claims
Expected Claims $
*Source: The Kaiser Family Foundation Employer Health Benefits Survey, 2005 4
Fully Insured funding averages the risk across the pool. On average, self-funded employers run under expected four-out-of-five years, but experience volatility year over year and must be prepared for the “bad” year.*
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Fully Insured Funding
Functions as full insurance protection
Employer pays a fixed monthlypremiumInsurance plan assumes full claimliability
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Predictableexpenses
Premiums do not fluctuate based on actual claims incurred by plan membersRates are set prospectively and are guaranteed forthe plan year No additional costs attermination
Benefits aligned by state
State required benefits are included automatically
Also referred to as pooled orguaranteed cost
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CIGNA Fully Insured Product Overview51 (or more) ELIGIBLE and Minimum of 50% PARTICIPATION
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Simplicity and predictability
Fully insured funding is ideal for companies looking for the financial protection that comes from knowing their annual health care expenses.With a fully insured option, companies:
A fully insured option
Can easily budget with a single, set premium amount due each month.Get full protection for covered claims, regardless of how high claims go during the year.Enjoy features that are straightforward and easy to understand.Gain financial advantages in claims risk by being combined with a large group of smaller employer clients.
Innovative funding options
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Self-Funding
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Functions as a self-administered plan
Employer pays an administrator to provide benefitsOften paired with Stop-Loss insurance to limit the total liability (especially for smaller employers)
Pay for what yourplan uses
Employer liable for paying claims incurred by their plan’s membersLow claims: > lower payments; High claims: > higher paymentsEmployer holds reserves (versus fully insured carrier holding reserves)
Benefits uniformamong all states
Flexibility to design a customized benefit plan – not subject to state mandated benefitsDesigned with the help of an administrator and broker based on employer’s/ employee’s needs
Also referred to as“ASO” (Administra-tive Services Only)
For this presentation, all references to self-funding assume a paired arrangement with Stop-Loss insurance
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Why Consider Self-Funding?
Your client wants to benefit financially from good claims experienceYour client needs greater control and flexibility over their plan design (No canned plans)Your client needs one consistent plan design across multiple states
You and your client want better reporting & transparency of their
healthcare costs (Puts you in better position to negotiate renewal to
help clients)
Your client wants to participate in the health and wellness of their
members
Your client wants lower Premium Taxes
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What about self-funding can ‘scare’ small employers?
Fluctuations in monthly payments
Unknown Terminal Liability due if they terminate the plan
Large claims and/or unfavorable claims experience
Delays in stop loss reimbursements
Hidden fees or ‘pass through’ costs that make budgeting difficult
Stop Loss covered charges not matching plan covered charges
Complex contract provisions
- Minimum Attachment - Deficit Carryover Provision- Lasers at renewal
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CIGNA Level Funding Product25 (or more) ENROLLED
Level Funding: Protection Geared to Smaller Employers
CIGNA Stop Loss
Provisions
Low Individual stop-loss levels with Immediate Reimbursement
Low attachment levels with Monthly Accommodation
15 months of Runout protection (12/27 spec & agg)
Level Funding
Contract Provisions
No lasers
No deficit carry forward
No terminal liability
No minimum attachment
Includes 12/27 spec & agg
Confidential unpublished property of CIGNA. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2010 CIGNA
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How does Level Funding Work?
$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 15month
run-out
Tota
l Cos
ts
Monthly claimsfunding (MCF)
Administrativeand insurancecosts (A&I)
1 Held by CIGNA on behalf of the group
Client pays pre set level payments (max costs) each month of policy year, based on actual enrollment each month Client and broker can view monthly claims reporting and assess expected surplus throughout the yearIn month 15, a reconciliation is done to assess Claim Funding Surplus, less the Terminal Fund1 set aside (to cover runout claims; no additional fees due)In month 16, the client benefits from an administrative fee credit for their portion* of the Claims Funding Surplus
*Surplus Share arrangements vary and may be impacted by state regulations. Includes 2/3 option, ½ option, and 100% option.
TerminalFund = 50% Mo. 11 Claim
Funding + 75% Mo. 12 Claim Funding
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Who Are the Ideal Candidates?
1 What employers want from health insurers in 2010: Better information, more value, Pricewaterhouse Coopers’ Health Research Institute, January 2010
Level FundingThe “losers” under Obama Care (Young, healthy, favorable industry)
Wants to benefit from good claims experience
Needs greater control and flexibility
Needs consistent plan across multiple markets
Wants better reporting & transparency
Wants to participate in the health and wellness of their members
Wants lower Premium Taxes
Is accustomed to fully insured Needs predictable paymentsNeeds low pooling level
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CIGNA Graded Funding Product25 (or more) ENROLLED
Graded Funding: Protection Geared to Smaller Employers, with Added Flexibility
CIGNA Stop Loss
Provisions
Low Individual stop-loss levels with Immediate Reimbursement
Flexible Aggregate Attachment Points
Low attachment levels with Monthly Accommodation
15 months of Runout protection (12/27 spec & agg)
Graded Funding
Contract Provisions
No lasers
Optional deficit carry forward
Pre-established terminal liability
Optional minimum attachment
12/27 spec & agg
Confidential unpublished property of CIGNA. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2010 CIGNA
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How does Graded Funding Work?Traditional self-funded product, but designed for the smaller employer
Client pays fixed costs each month plus claims, up to a pre-defined maximumFinancial design of the product follows claim patterns: Month 1 (25%) & Month 2 (50%); Months 3-12 are at 100%. Allows for cash flow savings to employer.
Client and broker can view monthly claims reporting and assess savings throughout the year The employer retains all unspent claim dollars under pre-set liability maxesReserve liability is pre-determined, and held by the client until termination
125% liability
not collected in Month 1 & 2 = terminal liability funding
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Who Are the Ideal Candidates?Graded Funding
The “losers” under Obama Care (healthy, young, favorable industry)
Wants to benefit from good claims experience
Needs greater control and flexibility
Clients seeking cash flow advantage
Needs consistent plan across multiple markets
Wants better reporting & transparency
Wants to participate in the health and wellness of their members
Wants lower Premium Taxes
Wants to retain ALL unspent claim dollarsIs comfortable with variations in monthly cost, and like the benefit of cash flow
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Self-Funded CIGNA vs TPA
SELF-FUNDED CIGNA VS TPACIGNA TPA
NETWORK OWNED & CONTROLLED BY CIGNA
RENT-A-NETWORK (PATIENT MAY BE BALANCED BILLED)
NETWORK DISCOUNTS TIER 1 TIER 3
CONTRACT TYPES FIXED FEE FOR SERVICE FOR SPECIFIED TIME PERIOD
PERCENT DISCOUNT OFF CURRENT “RETAIL”
SERVICES ALL PROVIDED BY CIGNA OUTSOURCED TO MULTIPLE VENDORS
ADMINISTRATION FEE FEE IS ALL-INCLUSIVE FEE MAY NOT BE ALL-INCLUSIVE
CIGNA TPA
RUN-OFF LIABILITY DETERMINED AT TIME OF SALE MAY BE UNKNOWN AT TIME OF SALE
RUN-OFF ADMINISTRATION FEES DETERMINED AT TIME OF SALE MAY BE UNKNOWN AT TIME OF SALE
SELF-FUNDED CIGNA VS TPACIGNA TPA
SET UP FEES ?
PLAN DOCUMENT PREP ?
CLAIMS ADJUDICATION ?THIRD PARTY SUBROGATION LITIGATION
?
RX SERVICE FEES ?
PRINTING ?
NETWORK ACCESS FEES ?
WELLNESS PROGRAMS ?
MEDICAL MANAGEMENT ?
AGENT COMMISSIONS ?
DISCOUNT PROGRAMS (VISION;HEALTH CLUB)
?
EAP/HOTLINE/24 HOUR LINE ?
ACTURIAL VALUE ?
EXTENSIVE CLAIM REPORTS ?
CONSULTING SERVICES ?
Items to Consider:
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Requirements for Quoting
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CIGNA Quoting InformationUnlike other carriers case characteristics make a huge difference in rating discounts given for favorable characteristics, Individual Medical Underwriting is not weighted as heavily as other carriers
25 enrolled employees to 99 enrolled employees- Current Census (including COBRA)- Current Rates- Current Benefits- Renewal Rates (once available)- Contribution Strategy - 5 Year Carrier History- Group Questionnaire (For estimated rate)- For firm/final rates we need individual health statements
100 enrolled employees to 250 eligible employees- Current Census (including COBRA)- Current Rates- Current Benefits- Renewal Rates (once available)- Contribution Strategy- 5 Year Carrier History- Group Questionnaire - Month-by-Month Claims Experience- Large Claims Report
Confidential unpublished property of CIGNA. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2010 CIGNA
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Case Characteristics Example
Employee Participation – 95% (+6 points)Employer Contribution for employees – 95% (+3 points)Employer Contribution for dependents – 50% (0 points)Carrier History – 1 carriers in 5 years (+4 points)Large Claims – No Large Claims (+8 points)Available Info – Current and Renewal Rates – Both (+3 points)Mandatory Online Health Risk Assessment – Yes (+2 points)Number of COBRA Participants – None (0 points)
26 Total Points = 10% discount
