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HomeMy WebLinkAbout08-16-2011 Regular MeetingST A TE OF ALABAMA )( COUNTY OF BALDWIN )( The Financial Advisory Sub-Committee on Self-In s ured met at 2 :00 p .m., City Hall , Delchamps Room , 16 1 North S e ction Stree t , Fairhope, Alabama 36532 , on Tues day, 16 Au gus t 2011 . Present were: Members: Chuck Zunk, John Brown, Debbie Quinn, Mike Ford , and N ancy Wilson . Lisa Hanks and Rose Fogarty were also present. City Treasurer Nancy Wilson introduced Will L y les from Blue Cross Blue Shield w ho explained in detail the differences between p a1iially being in s ured a nd remaining w ith Blue Cross Blue Shield; (See attached handouts from Lyles). If the City goes to partiall y insured this will not change anything in the plan ; Blue Cross and Blue Shield will still manage the City 's plan even if the City goes with someone else for s top loss cov erage. Mr. Lyles mentioned that if we went with Blue Cross Blue Shield, they would pay the large claims and then get reimbursed from the insurance company. The City would not have to worry about funding those claims. There being no further bu s ines s to com e before the Financ ia l A d v is ory S ub- Committee on Self-Insured, the meeting was duly adjourned at 3:30 p .m. Interoffice Memorandum To : Will Lyles From : Valencia R. Walker Date : July 20 , 2011 Subject : City Of Fairhope Group Number(s): 74595 Shown be low is a quote with an effective date of 10/01/2011. The suggested financial arrangement is electronic transfer (Weekly Wire or Automated Clear inghouse). The quote is based on approximately 277 contracts . Converti ng from Underwritten to Seff Insured is not on the list of changes that will cause loss of grandfathered status for purposes of Healthcare Reform. However, there is the risk that i t may be determined to cause toss of grandfathered status at some point i n the future. Expected Paid Claims Cost: Adm inistrative Fee %: Suggested Fund ing Rates : Employee Fam ily Average Weekly Pa id Claims and Admin Fees : -EPS premium of $3 .94 for single and $11 .81 for all others is inclu ded in the conversion rates shown above . AirMed billed amount of $1.23 per contract are included in the above rates . -Please note that any claims incurred prior to the date of conversion to self funded would be paid under the current fully underwritten plan . Also , ITS acces s fees under the se lf fun ded arrangement would be bil led to the group in addition to the adm i nistrative fee. Attachment cc: Marketi ng Support Life Agency $726 .50 6.60% $394 .17 $990 .04 $49,500.00 CITY OF FAIRHOPE Reinsurance Analysis For Policy Period 10/0l/2011-9/30/2012 Cove rage includes medical and rx and is based on a 12/12 contract basis. Estimated annualized premium is based on counts of single 50 and family 228. ~LE benefit olution a LLOYDS OF LONDON ($1 ,000,000 maximum renews each 12 month policy period) Estimated Aggregate Specific Deductible Single Rate Family Rate Composite Rate Aggregate Rate Annual Premium $50,000 $59 .06 $129.59 $116.90 $4 .91 $16 ,380 $75 ,000 $42.40 $95 .77 $86.17 $5 .01 $16 ,713 $100 ,000 $32 .56 $75 .86 $68 .07 $5 .08 $16 ,947 $125 ,000 $25 .62 $60 .10 $53 .90 $5 .12 $17 ,080 Laser(s): July data required to finalize terms BCS INSURANCE COMPANY ($1,000 ,000 maximum renews each 12 month policy period) Specific Deductible $50 ,000 $75 ,000 $100 ,000 $125,000 Single Rate $86 .61 $58.83 $39 .94 $27 .78 Family Rate $162 .93 $110 .68 $75 .12 $52 .25 Laser(s): July data required to finalize terms Composite Rate $149 .25 $101 .39 $68.82 $47.86 COMPANION LIFE ($1,000,000 lifetime maximum) Specific Deductible Single Rate Family Rate $50,000 $84.47 $209.92 $75 ,000 $58 .79 $146.08 $100 ,000 $42.54 $105 .72 $125 ,000 $31.85 $79.15 Laser(s): July data required to finalize terms Composite Rate $187 .36 $130.38 $94 .36 $70 .64 Aggregate Rate $2.94 $3 .73 $5.25 $6 .62 Aggregate Rate $4 .10 $4 .20 $4.23 $4 .28 Estimated Aggregate Annual Premium $9,843 $12,488 $17,577 $22 ,164 Estimated Aggregate Annual Premium $13 ,678 $14 ,011 $14 ,111 $14 ,278 Estimated Specific Estimated Annual Annual Premium Total Premium $389 ,994 $406,374 $287,467 $304 ,1 80 $227 ,089 $244,036 $179,806 $196 ,886 Estimated Specific Estimated Annual Annual Premium $499,689 $339,454 $230,409 $160 ,235 Total Premium $509,532 $351 ,942 $247 ,986 $182 ,399 Estimated Specific Estimated Annual Annual Premium $625 ,026 $434 ,950 $314 ,770 $235 ,666 Total Premium $638 ,704 $448,961 $328 ,881 $249 ,944 GLENCAIRN ~ Glencaim Limited 30 Fenchurch A venue London EC3M 5AD www.ekncaimeroup.com Lloyd' e lf-Insured Medical Stop Loss Insurance D TE: :!6-Jul-1 I PR PO ·o r P RIOD: C RRIER: RED : Third Party Administrator. PPO etworl. S ingle Employees: Family Em ployees: Total Employees: City ofFnirhopg 12 months at: I st October 20 I I Certain Underwriter's at Lloyd' + STRO G tandard and Poor's A (EXCELLE T) AM Best' BCBS Alabama BCBS 50 228 278 ggrcgnte emus assume Medical and RX are included. Opti n t. Opti t. Contract Basi : 12/12 12/12 Aggregate Insured Limit: 1,000,000 1,000,000 Single Aggregate Factor: 328.33 $345.25 Family Aggregate Factor: 853.66 897 .66 Composit Aggregate Fa tor: 759.1 798.3 1 Minimum Annual Anachment Point: 2,532.612 $2,663,148 Any One Person Limiiation: 50,000 $75.000 Monthly ggregatc Premimn Rate: .91 5.01 nnual ggregate Pn:mium: 16,380 $16,713 Op fon . 12/12 12/12 Sl.000.000 1,000,000 355.60 363.20 S924.57 944.33 . 822.24 '839.SI $2,742,984 $2.801,607 100.000 125000 5.08 .12 16,947 17,080 GLENCAIRN ~ RAGE: Specific terms assume Medical and RX are included. O ption I. Opt ion 2. O ption 3. O p ·on: 3. Contract Basi : 12/12 12/12 12/12 P 12 p.:cific Deductible: 50,000 $75.000 100.000 125.000 Annual Maximum Specific Limit: .950,000 $925,000 .900,000 5 .000 Single Employee Premium Rate: 59.06 $42.40 S32.56 25.62 Family Employee Premium Rare: 129.59 $95.77 S75.86 $60.IO Composite Employee Premium Rate: $116.90 S86.l7 S68.07 53.90 Annual Specific Premium: S389,994 S287.467 S227,089 S l 79.806 Tomi Estimated S~itic and g2l"CPte Annual Premium : ~25zJ74 $304,180 $244.036 il96. 86 I. Full details any ongoing claims e cess of 50% of the chosen deductible and any others likely io affect upcoming contra t t the time of quoting or through 10 month data. whichever the later. 2 . object to igncd disclo ure prior to binding . Quote i • basoo on plan benefit contained in the requ t for proposal. 4 . No claims will be payable without a current igned plan document. 5. Premiums inclod Alab:ima trrptus Lin T at 6.00% 6. Full detail of an claimants in case management a time of quoting or IO months, whichever the later. 7. If enrollment fluctuates by more than 30% up or down during the plan year then Underwriter's retain the rig.II to re-un<len rite the terms. 8. Subject to review of 50"/• large claims and aggregate paid claims thm IO months. Funher information on Lloyd' is av ilablc at ww"'.lloyds.com It i your duty to disclose II material fucts to underwrite roeinsurers prior to inception ofth.! policy. and to liteq, them d~ of any ~uch fu or chan to mch foe throughom the currency of the policy. and upon renew.JI of the policy. II material infunnntion concerning the ri k including any I or claim smti tics hould be accur.u and kli?pt op to dat at oil tim mat ri I fuct is a fact l hi h may influence an underwriter' judgment in tbcir ossessm nrofn ri . lfyou are in any doubt :is to whether a met i material, we n.-commcnd that it be discl !d. Failure to discl · material fucts may entid • underwrircrs to void the policy from inception. BCS Insurance Company Illustrative Rate Indication Cost Benefit Summary Account Name: Proposal Effective Date: Eligible Employees (covered u nits): Proposal Options: Specific Stop Loss Rating: Attachment Point: Accumulation Basis : Stop Loss Maximum (less Attachment Point): Composite Monthly Specific Rate: (or) Single Monthly Specific Rate : Family Monthly Specific Rate : ggTegate Stop Los Rating: Corridor: Accumulation Bas is: Expected losses (per covered unit per month): Compostte Aggregate Attachment Point: Maximum Run-in llablllty: Minimum Annual Aggregate Oeductib e : Stop loss Maximum: Aggregate Monthly Rate Per Employee: City of Fairhope 10/1/2011 To1:al 279 [S (50) / F (229)) Option A Option B Medical/Rx Medical/Rx $50,000 $75,000 12/U 12/12 $950,000 $9 25,000 $149.25 $10L39 $86.61 $58.83 $162.93 $110.68 Med cal/Rx Medica l/Rx 125.0% US.0% 12/12 12/12 $588.54 $643.68 $735.68 $804.60 N/A N/A $2,340,000 $2,559,000 $1,000,000 $1,000,000 $2.94 $3.73 OptionC Op1ionD Medical/Rx Medical/Rx $100,000 $125,000 12/U U/U $900,000 $87 5,000 $68.82 $47.86 $39.94 $27.78 $75.U $52.25 Medical/Rx MedcaVRx 125.0% 125.0% 12/U 12/12 $672.70 $689.U $840.88 $861.40 N/A /A $2,675,000 $2,740,000 $1,000,000 $1,000,000 $5.25 $6.62 The estimates below are based on the assumption that the enrollment will remain at the number of eligible employees listed above. Esti mated Specific Annualized Premium : $499,689 $339,454 $230,409 $160,235 Esti mated Aggregate Annualized Premium: $9,843 $12,488 $17,Sn $22,164 Estimated Total A nnualized Premium: $509,532 $351,942 $247,986 $182,399 Estim ated Annualized Insured Liability : $2,972,589 $3,045,743 $3,063,252 $3,066,3 66 Special Considerations: Th is proposal is illustrative pending the receipt and revi ew of an u pdated census, monthly enrollment and daims, and large dacms d! "fis; t hrough July 31, 201L La rge claimant details must include diagnosis, prognosis, and current status information for all claimants in excess o f 50% o f the lowest specific attachment point. Based on this u pdat ed informatio n it is possible that ii ustrative rates could change and/or lasers could be applied. This proposal assumes retirees are covered under stop loss. Specific advance funding ts not i ncluded. Page I of5 BCS Insurance Company Illustrative Rate Indicat io n Cost Be nefi t Summary Proposal Terms: 1. This document is a proposal only. BCS is not obligated to provide Stop Loss insurance coverage until a fully completed appfacation is received, reviewed and accepted. 2 . Upon recei pt of the fully completed application, BCS retains the right to re-underwrite t he terms of t he proposed policy and/or exclude specific i ndividuals from coverage based upon the new information rece ived i n the application. 3 . Only individual claims up the Group's Specific Stop Loss attachment point will be applied toward Aggregate St op Loss coverage . 4 . The Specific Stop Loss attachment point is per covered i ndividual per contract period . S. The Aggregate Stop Loss attachment poi nt equals the Expected Losses adjusted by the Corridor percentage. 6. Reinstating Attachment Point (incurred date) definition: A definition of i ncurred date is as follows: A claim is considered to be incurred on the date that a service is rendered or a supply is delivered . However, in the case of a hospital claim, each day of a hospital stay is considered a separate incurred date. Date of Proposal: July 26, 2011 Page 2 of 5 BCS Insurance Company Illustrative Ra t e Indica tio n Cost Be nettt Summary BCS Excess Loss Insurance A BCS Financial Corporation su bsidiary, BCS Insurance Company is an excess loss insurance and reinsurance specialist. BCS Financial Corporation is a for-profit, multiple-line Insurance and insurance services holding company. BCS Insurance Company is rated in the "A" category by A.M . Best and is licensed in all 50 states. This proposal includes Eligibility Requirements, General Stop Loss Provisions and a Cost/Benefit Summary. Eligibil ity Requirements Only employees and their dependents that are enrolled in the group's employee benefit program are eligible for coverage. Ergibility fur new employees will correspond to the eligibility provisions of the above program. Eligible Expenses Only those expenses, which are eligible under the g roup's employee benefit program are eligible under this excess loss progJam. Attachment Point/Ded uctible The point at which the excess loss program becomes liable for the payments made under the group's emp oyee benefit program is the attachment point. Stop loss Umlt/Mwdmum The maximum amount payable by this program. ~losses The amount of losses per covered unit per month, anticipated to occur under the group's employee benefit program. Expected losses m ultip lied by the n u mber of covered units per month are used to determine the attachment point. Accumulation Bas is The accumulation basis d escribes which daim payments made u nd e r the group's employee benefit program ill be applied toward meeting the attachment p o int. Agreement/Contract Period The agreement shall continue in effect for twelve months beg inning at U:01 A.M . on the effective date. Page 3 of5 BCS Insura n ce Co m pany Illustrative Rate In d ication Cost Ben efit Summary Cl aim Payments A claim is considered to be paid when covered charges are determined and a check or draft is issued and deposited in t he U.S. Mail or otherwise delivered to the payee, with funds on deposit. A claim is considered to be incurred on the date a service is rendered or a supply is delivered. In the case of a hospital claim, each day of a hospital stay is considered a separate i ncurred date. A claim shall mean only such amount: 12/12 An expense both incurred during the contract period and paid during the same contract period. U/15 An expense incurred during the contract period and paid during the contract period or paid in the 3 month period i mmediately folillowing the end of the contract period. U/18 An expense incurred during the contract period and paid during the contract period or paid in the 6 month period i mmediately foll lowing the end of the contract period. 12/24 An expense Incurred during the contract period and paid during the contract period or paid in the 12 month period i mmediately following the end of the contract period. 15/12 An expense Incurred in the three-month period immediately preceding the beginning of the contract period or i ncurred during the contract period and expense must be paid during the contract period. 18/12 An expense incurred in the six-month period immediately preceding the beginning of the contract period or i ncurred during the contract period and expense must be paid during the contract period. 24/12 An expense incurred in the twelve month period immediately preceding the beginning of the contract period or incurred during the contract period and the expense must be paid during the contract period. PAID An expense incurred in any period immediately preceding the beginning of the contract period or i ncurred during the contract period aoo the expense must be paid during the contract period. The service or supply must be specified i n the ~roup's employee benefit program as covered. The group or its admi n i strator stea l adjust. settle or compromise all daims i ncurred under the group's employee benefit program. Any expenses related to the payment of these claims, with the exception of adjustment or legal expenses in connection with the defense of cla i ms will not be eligi b le fur reimbursement under this excess loss coverage. Specific Run-In Umit The maximum amount of covered expenses per person during the policy period for claims incurred i n the "quoted" or "elected• run-in period prior to the effective date of the policy. Terminal Li ability The specific terminal liability option is extended to provide run-out coverage for the selected policy accumulation basis. Upon termination, this option extends coverage for all claims incurred during the policy period and paid during the elected run-out period (three, six, or twelve months) as reflected in the proposal. This option must be elected at the beginning of the contract year. Page 4 of5 Bes Insurance company Illustrative Ra te Indicatio n Cost Bene fit Summary Limitations and Exdusions • The annual attachment point will equal the greater of the sum of the first twelve months of enrollment multiplied by the monthly attachment point or the minimum annual aggregate deductible as indicated on the proposal. • No change in benefits provided by the group's employee benefit program shall be covered by the excess loss agTeement nor sha I any amounts paid as benefrt.s resulting fTom such a change be counted towards the satisfaction of the attachment point. This limitation may be waived if a written acceptance of such a change is issued by BCS Insurance Company. • All expenses for services or supplies not specifically listed as covered medical expenses under the group's employee benefit program are excluded under the excess loss program. • All expenses for services or supplies In excess of any limitation under the group's employee benefit program are excluded under the excess loss program. • Worker's Compensation Is not covered under this proposal. • The service or supply must be covered In the group's employee benefit plan. The group or Its administrator sha ll audit, calculate, and pay all claims Incurred under the group's employee benefit plan. Any costs of administering your pla.n, with the excep1ion of adjustment or legal expenses In connection with the defense of claims, will not be eligible for reimbursement under this stop loss coverage. Progra m Adm in istrat i on Premiums Premium will be paid monthly. Settlement of Oaims Specific Excess Loss The insured shall report losses to the insurer within the earlier of ninety d ays after payment or within ninety days after the end of the claims accumulation period, but in no event later than ninety (90) days after the end of the claims submission period specified in the account's benefit program. Payment of any amount due the insured shall be made thirty days after receipt of the proof of loss. Payment to the insured shall be after cession of all other insurance. Aggregate Excess loss The insured shall report losses to the i nsurer within ninety days after the end of the contract year. Payment of any amount due the i nsured shall be made thirty days after receipt of the proof of loss. Payment to the reinsured shall be after cession of all other reinsurance. A copy of the Summary Plan Description must be included in the submission to BCS. Acceptance A notice of acceptance must be received in writing prior to the effective d ate of the insurance, and It must be received prior to the expiratio n of the rates . Inspection of Records The insured shall m aintain records as are reason ably required by BCS Insurance and shall furnish BCS Insurance all pertinent data with resp ect to participants covered under the benefit: program. BCS sh all have the right to inspect the records of the insured or any administrator at reasonable intervals during normal business ho urs tor any purpose relating to the coverage. Th ank you for the opportunity to prepare this stop loss proposal. Page 5 of5 Employer Name: City of Fairhope Effective Date: 10/1/2011 Companion Life Insurance Company STOP LOSS PROPOSAL Specific Employees Family Total Aggregate Emp owes Sing e Family T ma Proposal Number: (31829---~ Single 50 &S!.lm! 1 228 278 Composite 50 228 278 City I State TPA TPA:2 Network Network 2 Fairhope, AL 36532 Blue Cross/Blue Shield (AL) N/A Blues ASO • PPO with BlueCard N/A O(!tion 1 Specific Deductible $50,000 Lifetime Maximum 1 ,000,000 Contract Basis 12/ 12 Brokerage Commission 0.()0% S ingle Rate $84.47 Family Rate 209.92 Composite Rate $187.36 Specific Monthly Premium 52,085 pacific Annu I Premium $625,026 01:!tlua l Specific Deductible $50,000 Aggregate Maximum 1,000,000 Contract Basis 12 / 12 Single Factor 331 .66 Family Factor 824.18 Composite Factor 735.60 Annual Attachment Point 2 ,453,947 Minimum Attachment Point $2,453,947 Aggregate Rate PEPM $4.10 Run_.n Limit 0 Risk Corridor 25% Monthly Aggregate Accommodation No Retirees 38 SPECIFIC STOP LOSS Coverage: Medical Rx Ootion 2 Option 3 $75,000 $100,000 $1,000,000 1 ,000,000 12 / 12 12/ 12 0.00% 0.00% $58.79 $42.54 $146.08 $105.72 $130.38 $94.36 $36,246 $26,231 $434,950 $314,770 AGGREGATE STOP LOSS Coverage : Medical Rx Optism i Option 3 $75,000 $100,000 $1 ,000,000 $1 ,000,000 12 / 12 12 / 12 354.14 360.38 880.04 895.54 785.45 799.29 $2,620,264 $2,666,420 $2,620,264 $2,666,420 $4.20 $4.23 ·$0 $0 25% 25% No No Option 4 $125,000 $1 ,000,000 12 / 12 0 .00% 31 .85 $79.15 $70.64 $19,639 $235,666 Q12liszn 1 125,000 $1 ,000,000 12 / 12 371.06 922 .08 822.98 $2,745,447 2 ,745,447 $4.28 $0 25% No Tuesday, July 26, 2011 Quote is subject to the conditions, terms, and qualification pages. I I Co m pan i on Life In su ran ce Co mpany STOP LOS S PROP OSAL Employer Name : City of Fairhope Proposed Effective Date: 10/1/2011 SPECIFIC STOP LOSS CONDITIONS Actively-At-Work Option: A-A-W will be waived subject to satisfactory Disclosure Statement. Advanced Funding Option: Included Alcohol and Substance Abuse Conditions: Per the employer's Plan Document. Pre-existing Conditions: If the pre-existing condition wording in the underlying plan document has been in effect for a minimum of 12 months and does not limit benefits due to pre-existing condition, the Stop Loss policy will follow the pan document. Otherwise, a 3/12 pre-existing conditions limitation will apply subject to any exceptions a llowed under the Heahh Insurance Portability and Accountability Act. Spectfic Lifetime Maximum: 100% of the eligible claims up to the maximum shown on page 1 of this proposal per COYefed person , less the Specific Deductible for that person, shall be reimbursed by Companion Life Insurance Company. A completed Disclosure Statemen is n eded to finalize this offer no later than 15 days after the effective date of coverage AGGREGATE STOP LOSS CONDITIONS Aggregate Maximum: 100% of the eligible claims for covered expenses of the Aggregate Attachment Point, up to the maximum shown on page 1 of this proposal shall be reimbursed by Companion Life Insurance Company. Aggregate Stop Loss Reinsurance cannot be purchased without Specific Stop Loss Reinsurance. Multiple Coverage: If the Aggregate includes separate Attachment factors for multiple lines of coverage, then the Annual Attachment Point will be based on all coverage combined. If multiple lines of coverage are requested , we will require that monthly claims and enrollment be provided separately before finalizing the Aggregate offer. UNDERWRITING TERMS Stop loss offer is valid for fifteen days following the proposed effective date of coverage. I I I Agent does not have the authority to bind or modify the tenns of this quotation or the policy to be issued without prioT approval o Companion Life Insurance Company . Composite rates I factors are for illustrative purposes and cannot be sold unless approved by underwriting. We recommend that the group ma ntain in-force coverage until written acceptance of replacement coverage is provided by us. Network fees are not eligib e expenses under Specffic and Aggregate coverage unless specifically addressed in the Qualtflcations sections of this proposal. Any unfunded claims balance must be disclosed, otherwise such claims will not be considered eligible under the Stop Loss Policy. Tuesday. J~ 26. 2011 Quote is subject to the conditions, terms, and qualification pages.. Employer Name : City of Fairhope Companion Life Insurance Company STOP LOSS PROPOSAL Proposed Effective Date: UALIFICA TIONS 10/1/2011 tf a total enrollment or single/family ratio listed on the application varies by more than 10 percent of what was quoted, we reserve the right to re-price our Specific and Aggregate numbers. Quote assumes Blue Cross/Blue Shield of Alabama network, if this is not the case MRM reserves the right to re-price. Quote assumes current plan design. It is assumed that Thomas L. Kidd will be Medicare Primary Effective 8/1111 . MRM reserves the right to re-price if this assumption is not correct." This proposal is contingent upon receipt and revi w of the following reports with information through 7/31 /11 : 1. Stop Loss Report Member Level Pa d Amount $25 ,000 and over. 2 . Claims By Member Report 3. Case Management Notes if app icable 4 . Trigger Diagnosis Report. MRM reserves the right to re-price based on this information. This quote is contingent upon Final Underwriting. Tuesday, Jdy 26, 2011 Quote is subject to the conditions, terms, and qualification pages. f.\BLE benefit solutions New Program Available: Immediate Direct Reimb11rsement Our Direct Reimbursement Program is available to your group at no cost. You will receive credits on your health billing for any amounts reimbursable under your reinsurance policy through Able Benefit Solutions. Your reinsurance carrier will reimburse Blue Cross Blue Shield of Alabama for any claims over the specific deductible so that you are never out of pocket for any amount in excess of the specific deductible. This is an exclusive arrangement with Blue Cross Blue Shield of Alabama in conjunction with ABLE Benefit Solutions. Cit~ of Fairhor;2e August 16th, 2011 Moving to Self Funded from Underwritten has its advantages and disadvantages. Some of those advantages are: • Increased Financial Control -Allows you to fund claims as they come due rather than funding them through advance premium payments. • Greater Flexibility -You have more control of your plan and can design it to address specific employee needs (Note: Careful attention must be taken when making changes due to the new HC Reform Laws). • Lower Costs -If you have a good year you get to keep the money that would have normally been paid out in the form of premium. Some of the disadvantages are: • Healthcare Reform Grandfathered Status Regulations -HHS recently put out a new amendment regarding grandfathered status that only applies to groups that are self funded and want to move to underwritten. The amendment as written, does not apply to financial arrangement changes - underwritten groups changing to self funded. HHS has never said that making the move from underwritten to self funded is prohibited. They asked for comments soon after the grandfathered rules came out earlier this year and have not provided any additional guidance on this issue as of yet. We have been told to advise our groups that making the change from underwritten to self funded is not on the can't do list in order to maintain grandfathered status however HHS has not yet issued guidance on this. We believe that it is unlikely that HHS will prohibit this type of financial arrangement change in light of the recent amendment, however we do not have anything specific that states it is permissible . • Actual losses may be more than predicted, causing the unexpected loss of funds that were to be used for other purposes . • Expenses could be higher than expected: If you have a large number of claims just short of your reinsurance deductible, that can leave your company vulnerable to very high expense . • Income taxes could be higher because the company will not be able to take premiums paid as a deduction; only the claims paid and operating expenses may be taken as a tax deduction . Things that must be considered before changing to self funded • Understand cash flow. Be cause se lf-funded emp oyers must ha e money avai able to make timely claims payments, organizations perennia ly short on cash should think twice about self-funding. They do work well, however, for ompanies with strong cash flows or reserves. The question that must e nswere is i we ave a run of severa arge c aims at once, an we afford to pa t em ? • Perform claims and demographic analyses. Unders anding the vo ume and nature of emp oyee health c aims is essential. Examples of questions to ask include: In the past five y ears, what was the annua total dollar va ue of claims? What percentage wa s ue t o one-time incidents vs. chronic or catastrophic illnes s? Does the workfo rce p rofile skew old (anticipate more chronic ii nesses) or yo ung {ant ici pa e more r e crea ional injuries)? The information gathe red from t he ana ys e s can h e lp project likely costs over the s ort-to-me ium term. • Are we large enough to safely self fund? As a rule of thumb, we normally do not advise groups below 250 covered employees to convert to self funded however it does happen . With that said, very careful analysis and planning is needed before it's done . City of Fairhope Important Information Concerning Reinsurance . 1. What is reinsurance? Answer -Reinsurance is an insurance product which provides protection against catastrophic or unpredictable losses. It is purchased by employers who have decided to self-fund their employee benefit plans, but do not want to assume 100% of the claims liability as a result. 2. Why do we need reinsurance? Answer-Reinsurance is designed to limit the employer's loss to a specified amount, to ensure that large, or unanticipated claims, do not upset the financial integrity of a self funded healthcare plan. 3. For reinsurance coverage, what carriers will be offered to the The City of Fairhope? What is your experience with these carriers? Answer: Our current reinsurance carriers are Lloyds of London, BCS Insurance Company and Companion Life. We have worked with Lloyds of London for 25 years, BCS for 12 years and Companion 10 years. All three have high ratings and we have had very positive experiences with each. We stand behind them all. 4. When a claim exceeds the reinsurance deductible, what is the turnaround time for reimbursement to The City of Fairhope? Answer: The turnaround time with us is immediate because of the Immediate Direct Reimbursement benefit. The City of Fairhope would receive a credit on their health billing with BCBS of AL showing the claim along with the reinsurance credit so that there is not any out of pocket expense for The City of Fairhope over the amount of the specific deductible. 5. Do the reinsurance plans offered by your company have a lifetime maximum benefit or a policy period maximum that starts over yearly? Answer -We can offer either1 but a plan that has a policy period maximum of at least $1 1 0001 000 that starts over yearly is what we recommend. 6. What degree of administration will be required of the HR Department for tracking and filing claims? Is The City responsible for tracking claims for each insured and knowing when a claim exceeds the reinsurance deductible? Answer: There is not any administration required as long as you use one of our carriers for your reinsurance. Blue Cross Blue Shield of Alabama offers reinsurance to employers through ABLE Benefit Solutions. ABLE would track all claims and file them once a member exceeded their specific deductible. We can also provide reports to update you on claims status at set time intervals. This is very important to understand that with some carriers1 it may be the responsibility of The City to notify the carrier once an employee or their dependent has exceeded the reinsurance deductible. 7. What are the time restrictions for claims to be filed and paid? Are there time period options {12,18,24 month) available? If so, what are the advantages/disadvantages to a longer or shorter period? Answer: The restriction depends on the contract basis selected. There are time period options of 12/151 12/18 or 12/24 to provide 3-12 months of run out protection. Run out are claims that were incurred but not paid until after the end of the contract period. The advantages of a shorter period are reduced cost but there is an increased risk. The advantages of a longer period are more protection. 8. Incurred/Paid Reinsurance -If the reinsurance limit is $35,000 and there is an ongoing claim paid to date at $33,000 when the plan year renews, what happens on that ongoing claim? Does it continue into the new plan year or start over? Answer: It depends on the contract basis selected by The City. In the case of a 12/12 or 24/12 contract basis then the claimant would start over again building the $351 000 specific deductible at renewal. If the contract basis is a 12/15., 12/18 or 12/24 then the ongoing claim could continue until the end of the run out period for that stop loss policy. For example., if the group has a 12/15 contract basis for 1/1/2012. The member would have an extra 3 months of claims to apply to the $35.,000 specific deductible. The period would be for all claims incurred 1/1/2012 through 12/31/2012., but paid 1/1/2012 through 3/31/2013. 9 . When the reinsurance policy is due for renewal , will other companies be contacted for review for better price options? Answer: Yes., we will automatically shop the renewal with all of our carriers to ensure the best pricing possible. 10. What happens when/if The City of Fairhope changes reinsurance carriers? How long after the change can claims be submitted for payment? Answer: If The City of Fairhope changed carriers at renewal., the claims can be submitted for payment as long as the claims pay before the end of the policy period.