Employee Benefit Group Captve Overview

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Employee  Benefit  Group  Cap2ve   Overview     Andrew  Clayton   Pareto  Cap2ve  Services  

CONFIDENTIAL  

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    

 

CONFIDENTIAL  

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  

CONFIDENTIAL  

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  

CONFIDENTIAL  

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  

CONFIDENTIAL  

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%  

CONFIDENTIAL  

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  

CONFIDENTIAL  

Contact  Info:     Andrew  Clayton   President   Pareto  Cap2ve  Services   [email protected]   (484)  362-­‐0226  

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