Employee Benefit Group Cap2ve Overview Andrew Clayton Pareto Cap2ve Services
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Pareto Cap2ve Services • Structures and manages employee benefit group cap2ves • One of the only firms to specialize in this area • Principals in aggregate have more experience with EB group cap2ves than any other firm in country • Exper2se in both financial and regulatory structure and popula2on health management • Cap2ves are controlled by employers, but not day to day responsibility • INDEPENDENT
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Fully Insured Health Insurance is Broken • Carriers push it extremely effec2vely – One year perspec2ve – No long term strategy – Its easy
• Very liNle “insurance” – more of a claims financing tool • “Cost Plus” system – Employer’s Claims + Carrier’s Profit
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10 Year Projec2ons 2.50 2.25
Fully Insured
2.00 1.75 1.50 1.25 1.00 0.75
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Year 8
Year 9
Year 10
10 Year Total
Fully Insured
1M
1.1M
1.21M
1.34M
1.47M
1.62M
1.79M
1.97M
2.18M
2.4M
16.09M
*Assumes fully insured premiums increase 10% per year
January 1st 2015 Beginning January 1, 2015, you are at a 6% disadvantage if you remain fully-‐insured, just because of taxes.
10 Year Projec2ons 2.50
Fully Insured
2.25 2.00
Self-‐Insured
1.75 1.50 Net Remaining Costs
1.25 1.00 0.75
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Year 8
Year 9
Year 10 10 Year Total
Fully Insured
1M 0.96M
1.1M 1.04M
1.21M 1.15M
1.34M 1.26M
1.47M 1.39M
1.62M 1.53M
1.79M 1.68M
1.97M 1.85M
2.18M 2.03M
2.4M 2.24M
Self-‐Insured
16.09M 15.12M
How Self-‐Insured is BeNer • Pay for what you use • Ac2onable data • Decreased claims equal lower costs for employer, not higher margin for insurer • Lower system costs • Studies show lower trend and lower costs • CONTROL
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10 Year Projec2ons
2.50 2.25
Fully Insured
2.00 1.75
Self-‐Insured Self Insured (Group Cap2ve)
1.50 1.25 Net Remaining Costs 1.00 0.75 Fully Insured Self-‐Insured Self-‐Insured (Group CapIve)
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Year 8
Year 9
Year 10 10 Year Total
1M 0.96M
1.1M 1.04M
1.21M 1.15M
1.34M 1.26M
1.47M 1.39M
1.62M 1.53M
1.79M 1.68M
1.97M 1.85M
2.18M 2.03M
2.4M 2.24M
16.09M 15.12M
0.96M
1.03M
1.12M
1.2M
1.27M
1.34M
1.39M
1.44M
1.48M
1.52M
12.74M
Group Cap2ve Value Proposi2on Group cap2ve provides the mechanism that allows a small to medium employer to transi2on from fully-‐insured to self-‐funded with lower risk and vola2lity
Group Cap2ve – Keep it Simple • • • • •
Self-‐insure Shock absorber More control Less risk and vola2lity Lower long-‐term costs
Group Cap2ve Structure • Break the typical insurance product into two pieces: benefits and risk financing • Benefits: – Each employer can have its own plan design – Each employer selects its own TPA (and network)
• Financing
– Each employer retains a small, self insured layer – Through the cap2ve the employers share a mezzanine layer of risk – Catastrophic claims are transferred to an insurance company
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Finance Structure – Claims Liabili2es by Layer
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Risk Sharing & Distribu2ons • The cap2ve’s principal func2on is to reduce vola2lity – No new lasers
• Claims in the cap2ve layer are pooled – including at renewal • Excess funds in the cap2ve are returned on a pro rata (to premium) basis • Distribu2ons are calculated 6 months amer the policies expire and quarterly thereamer un2l all reserves are gone – 12/18 policy types
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Sample Account – Projected Costs Claims Layer
Responsibility
Minimum
Projected
Maximum
$0 to $25,000
Employer
$0
$550,250
$700,000
$25,000 to $250,000
Cap2ve
$0
$193,750
$250,000
Over $250,000
Insurance Company
$200,000
$200,000
$200,000
Total
$200,000
$944,000
$1,150,000
% of Ref. Premium
20.00%
94.40%
115.00%
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Summary • You are going to need to do something different • You cannot drive down costs without driving down claims • You cannot drive down claims without data • You cannot have data without being self-‐insured • A cap2ve allows you to self-‐insure with a manageable level of risk
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Contact Info: Andrew Clayton President Pareto Cap2ve Services
[email protected] (484) 362-‐0226