cigna funding options64c251798550cb41e6d3-daba500433b2b7e227189b8e356c5f8e.r74.…cigna funding...

CIGNA FUNDING OPTIONS

How the right choice can help your clients make the most of their health plans

Lauren Stoddard Cigna Self-funding Product Manager Gerard Sessa Cigna New Business Manager

FOR AGENT/BROKER USE ONLY. DO NOT DISTRIBUTE.

• Gerard Sessa, Cigna New Business Manager –

– Market variables and identifying the fully-insured buyer

– The basics of fully-insured funding

– Advantages and considerations of fully-insured funding

• Lauren Stoddard, Cigna Self-funding Product Manager –

– Market variables and identifying the self-funded buyer

– The basics of self-funding

– Advantages and considerations of self-funding

• Funding solutions comparison

• Stop-loss, Level FundingSM, Graded FundingSM

• Building a multi-year strategy

Agenda

2 Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2016 Cigna

Is there a particular need for each state mandated benefit?

Identifying the buyer


How does your client view their health plan?

Does your client feel like they are healthier and younger than their competitors?

Has your client undertaken any wellness initiatives?

How does your client feel about transparency in their health care costs?

Does the idea of being claims credible/ participating in the risk cause discomfort?

What payment experience are they looking for – consistent monthly payments vs. variable?

• Is a “best on spreadsheet” buyer – looking for lowest cost.

• Likes being able to budget to a monthly health care cost.

• Has less tolerance for perceived risk.

• Has less interest in taking a role in wellness or utilization management initiatives.

• Doesn’t know whether or not they need state mandates but has to have them.

• Comfortable in a low-claim-credibility or community rated environment. Not much thought is given to how their population is running until renewal time.

A fully insured buyer typically :

It’s the employer’s role to provide coverage and access to market competitive health insurance.


THE BASICS • Full insurance protection • Predictable, fixed monthly premium for all costs • Insurance carrier pays covered claims • Also known as traditional funding or Guaranteed Cost (GC) • Subject to the state and federal benefit mandates: Taxes and other fees

Fully insured funding

FULLY INSURED

Underlying contract/plan Fully insured

Monthly payment Fixed premium

Maximum cost the client pays 100% of expected cost

Benefit from lower claims None

Benefit mandates State and federal

Taxes and fees State premium tax, health industry fee, PCORI/CERF and reinsurance assessment

Run-out claims responsibility Carrier pays claims incurred during policy year but processed after termination

Access to plan/utilization data None


Advantages and considerations of fully insured

DISADVANTAGES

• Less plan flexibility

• Higher expected costs/taxes

• Minimal insight into claim experience

• Less alignment with health and wellness strategy

ADVANTAGES

• Maximum protection

• Simple monthly payment

• No extra costs at termination/ no surprises

• Carrier is responsible for administration and claim payment


• Thinks of the health plan as a long-term investment.

• Believes that their population is healthier and younger than the rest of the insurance pool.

• Wants to participate in their own claims.

• Realizes that self-funding with Cigna is the same financial risk as fully insured.

• Wants transparency regarding health plan expenditures.

• Wants to begin or is already deeply involved with wellness and utilization management initiatives.

• Understands that plan designs can drive behavior and needs the plan design flexibility a self-funded plan can offer.

A self-funded buyer typically:

As a provider of health coverage, it’s the employer’s responsibility to influence personal behaviors to affect health outcomes.


THE BASICS • Client pays fee to administrator who administers the plan • Self-funding does not provide insurance protection • Reduces fixed costs • Clients pays all covered claims and hold reserves • Also known as administrative services only (ASO)

Self-funding

SELF-FUNDED WITH STOP-LOSS

Underlying contract/plan Administrative services only

Monthly payment Fixed and variable

Stop-loss premium, administrative costs and claims

Maximum cost the client pays Expected costs + a claims corridor (typically 10 - 25%)

Benefit from lower claims Savings returned in real time

Benefit mandates Some federal

Taxes and fees State premium tax applies to stop-loss premium, CERF/PCORI and reinsurance assessment

Run-out claims responsibility Carrier pays claims incurred during policy year but processed after termination

Access to plan/utilization data At least a yearly report showing plan costs and utilization at a detailed level

ADDITIONAL PROTECTION AVAILABLE

• Individual and aggregate stop-loss products protect cash flow


Advantages of self-funding

• Exempt from most state-mandated benefits

• Can offer same plan to employees in all states

• Detailed utilization and financial reports

• Informs benefit decisions and employee education initiatives based on client-specific needs

• State premium tax only applies to stop loss products

• Some health care reform fees under the Patient Protection and Affordable Care Act (PPACA) apply; some do not

• Client saves money when actual claims are lower than expected

• Aligns health and wellness objectives and benefit strategy with financial benefits

PLAN DESIGN FINANCIAL PARTICIPATION DATA TAXES


Considerations of self-funding

• Client assumes administrative role in: – Banking

– Privacy/Health Insurance Portability and Accountability Act (HIPAA)

– PPACA filings

• Client pays more when actual claims are higher than expected – higher maximum cost (can be mitigated with stop-loss products.

• Claim costs vary (higher or lower) each month.

• Additional payments due after termination. Client is responsible for run-out claims.


Funding solutions comparison

This comparison is intended to demonstrate key concepts across the funding continuum and is not intended to reflect technical pricing differences.

Full premium paid to carrier – client does not share

Held/funded by client Paid to carrier

While some of the costs are similar, the

25% corridor adds a large sum to “total

expected cost.”

FULLY INSURED: 100% MAXIMUM LIABILITY

Fixed costs Reserves Paid claims

SELF-FUNDED WITH STOP-LOSS: 125% MAXIMUM LIABILITY

Fixed costs Reserves Paid claims 25% aggregate corridor


INDIVIDUAL STOP-LOSS

AGGREGATE STOP-LOSS

Stop-loss

Throughout the year, a plan can experience claim fluctuation due to unexpected catastrophic claims related to serious illnesses or accidents; additionally, a shift in overall utilization can impact cash flow.

• Eleven of the twelve drugs approved for fighting cancer in 2012 were priced over $100,000 per year.*

• Employers gain peace of mind knowing maximum liability.

• Stop-loss limits impact of unexpected fluctuations in claims.

• Stop-loss premium adjusts based upon the level of protection client chooses.

*Blood Magazine, Journal of American Society of Hematology, April 25, 2013.

Limits liability to a predetermined amount for each covered individual on the plan, per policy year. Cigna offers individual dollar limits that range between $10K and $75K.

Limits the total claim liability for the plan year. Cigna offers aggregate levels typically set at 20% or 25% higher than expected claims.

Cigna offers a fully aligned stop-loss policy that allows for prompt reimbursement so claim payment is quicker and there are no separate fees or inconsistent policy interpretations.


Self-funding and termination costs

Two ways that self-funded products can handle termination costs and claims incurred during the policy year and paid after termination:

• Client pays carrier for cost to process claims paid after termination for a period of months (3, 12, 15, 18 months are most common). Client also pays actual claims.

• Client’s monthly payment during the active policy year pre-funds the termination administration costs and the claims.

As an employer moves between carriers, they must consider their terminal liability costs for the old policy year plus the costs for the new policy year.


Self-funding products that have fully insured features

Consider Cigna Level Funding℠:

• Client pays monthly fixed payments based on maximum costs and never pays more unless enrollment changes.

• Terminal fixed and claims costs are included with the payment – no costs at termination.

• ISL and ASL provide protection for higher than expected claims.

Increase in last three years of products that combine the flexibility and opportunity to save with the consistent monthly payments with a cap costs.


Cigna Level Funding℠ basics

• Self-funded contract • Integrated ISL and ASL with medical plan • Prompt reimbursement on stop-loss • Client pays a predictable, fixed monthly stop-loss premium

and claims funding amount • Claims funding includes terminal liability • Client-specific reporting/transparency • Typically 110-120% attachment

• Participate, or share, in claim experience. Employers can receive either ½, 2/3rds or 100% of the savings if actual claims are less than expected

• No deficits carried forward • Premium tax savings • Cigna pays run-outs after termination; the client is not liable

for any additional costs after termination • State benefit mandates do not apply • Health insurance industry fee does not apply

• Bank account setup • Client must renew and stay through 16th month to receive surplus • Surplus amount adjusted for terminal fund • Reporting for employer mandate

BASICS ADVANTAGES

THINGS TO KNOW

Reserves

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Month 16 run-out

Terminal fund $35

30

25

20

15

10

5

0

Monthly claims funding

Administrative and stop-loss premium (fixed costs)


1 2 3 4 5

Level Funding℠ – five things to remember

Experience – self-funded sales and

underwriting experts

since 2008

Know what you owe – consistent monthly

payment that includes terminal

coverage for 15 months

Opportunity to share

in savings if claims

run well, and you don’t pay more if claims

run worse than

expected

Premium tax and health industry fee

savings

No deficits that carry forward

from year to year


Graded Funding℠ – pay as you go and pay for what you use

This example is provided for illustrative purposes only. Actual components will vary. 1-Premium is Experience Rated Premium excludes Access fees and Pooling.

• Self -funded contract • Immediate reimbursement on stop-loss • Fixed monthly premium and variable claims funding amount • Client pays lesser “graded” amount of fixed costs in months one

and two • Client pays for actual claims • Client-specific reporting/transparency • Run-out period of 15 months

BASICS

• Client holds savings throughout year • Improved cash flow in months one and two • State benefit mandates do not apply • HIF/PPACA fee does not apply • Alternative to 100% surplus return products

ADVANTAGES

• Client takes on ERISA administration tasks • Bank account setup • Monthly accommodation – deficits from previous months can be carried forward • Credit risk deposit (varies based on funding frequency) • Client must fund run -outs (fixed and claims)

THINGS TO KNOW

50% 25%

25%

Jan Effective date

Nov Dec Jan Feb Jul Aug Sep Oct Mar Apr May Jun Feb Termination date

Expected cost

Fixed cost

Maximum cost

Protection for 15 months after termination (if client were to leave)

50%

125%

125%

Reserves First year


Graded Funding℠ – five things to remember

1 2 3 4 5 Experience – 25 years of self-funding options for

smaller employers

Pay as you go – pay for

actual claims each month and keep

any savings

Lower costs the first

two months

Premium tax and health industry fee

savings

Access to data to

help drive meaningful plan design

changes


Cigna’s multiyear strategy is built to grow with your business

• Fluctuating monthly costs with capped claim liability

• Savings when claims are lower than expected

• Full transparency into claim utilization

• Dedicated health improvement strategy resources that help to see year-over-year benefit of employee health programs

• Ability to retain plan flexibility

• Subject to lower premium taxes than fully insured

• Fixed monthly costs

• Savings when claims are lower than expected (partial)

• Full transparency into claim utilization

• Health improvement strategy resources and the opportunity to see any financial benefit from these initiatives

• Ability to retain plan flexibility

• Subject to lower premium taxes than fully insured

• Fixed premiums

• Easy administration and budgets

• Automatic compliance with state mandates

• No chance to save when claims are lower

• Little to no transparency into claim utilization

• Limited opportunity to benefit from health improvement initiatives

• Renewal experience is based on community rating standards

Fully insured Cigna Level Funding Cigna Graded Funding


Q&A


All Cigna products and services are provided exclusively by or through operating subsidiaries of Cigna Corporation, including Cigna Health and Life Insurance Company, Connecticut General Life Insurance Company, Cigna Behavioral Health, Inc., and HMO or service company subsidiaries of Cigna Health Corporation. The Cigna name, logo, and other Cigna marks are owned by Cigna Intellectual Property, Inc. 891707 05/16 © 2016 Cigna. Some content provided under license.

FOR AGENT/BROKER USE ONLY. DO NOT DISTRIBUTE.

cigna funding options64c251798550cb41e6d3-daba500433b2b7e227189b8e356c5f8e.r74.…cigna funding...

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