Transcript Presentation on forming a Group Healthcare Captive

Presentation on forming a
Group Healthcare
Captive
Friday May 21, 2010
2:00 – 3:00 pm EDT
Your Presenters:
Phil Collyer
President
National Assembly Business
Services, Inc.
Phil Collyer is VP of the National Human
Services Assembly and President/CEO of
the association’s for‐profit subsidiary,
National Assembly Business Services, Inc. In
2009, his program collectively saved
nonprofit members $10 million.
Retiring in 1991 from active careers in
science and industry, Phil helped build a
Washington DC nonprofit, Greater DC
Cares, into the region’s largest and most
comprehensive provider of community
service and volunteer management. He is
passionate about saving nonprofits money.
John Cassell
Senior Partner
Spring Consulting Group, LLC
John Cassell is the Senior Partner at
Spring Consulting Group, LLC. He is
responsible for the strategic focus of
the group and for corporate
development. John has over 20 years
experience in the healthcare and
financial services sector.
John is a regular speaker at industry
conferences and has contributed
articles and papers to a number of
publications and journals. He is an
associate of the Royal Society of
Medicine.
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Spring Consulting Group LLC
 Leading US actuaries and consultants in employee
benefits funding
 Spring associates established one of the earliest
employer group employee benefit funding programs
using a captive insurance structure in 1996
 Works with a wide range of associations and
employer groups including National Assembly since
2006 and ASAE since 2009
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National Human Services Assembly
• Formed in 1922
• American Red Cross, Boys &
Girls Clubs, YMCA
• Human services / community
development sectors
• Youth-serving agencies, family
strengthening, workforce
development
• 75 national members (incl.
AFB), 150,000 affiliates
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Health Reform: What is Likely to Happen
 What will happen now? – Some of the relevant changes within
the first year under the Reconciliation Bill include:
– Tax credits for businesses - businesses with fewer than 25 employees and
average wages of less than $50,000 could qualify for a tax credit of up to 35%
of the cost of their premiums (25% credit on payroll tax for non profits)
– Coverage of children under parents’ plan until age 26
– Elimination of:
• Lifetime caps on benefits ( annual limits 2014)
• Ability to rescind plans
• Pre-existing conditions
• Extended waiting periods
Increased government oversight and penalties levied against
health insurers pharma and medical device companies
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Health Reform: What is Likely to Happen
 What will happen in the future? – A complex series of
reforms that may be resisted at the individual state level
– Health insurance "exchanges“ for employers up to 100 employees
– Employer penalties for not providing appropriate cover
– New employer reporting requirements
– New charges for self insured plans
– Rules requiring insurers to accept all applicants
– Excise tax on “Cadillac” insurance plans
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Health Reform: What is Likely to Happen
 Other Key Proposed Developments:
– Establishment of the CO-OP program (designed to foster the
creation of non-profit, member-run health insurance companies);
$6B will go toward financing the program to establish CO-OPs by
July 1, 2013
– Premium subsidies for take up of prevention and wellness programs
in 2014
– States can form healthcare choice Compacts allowing cross selling of
state health plans from Jan 2016
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Why Developing Our Own
Health Insurance Program is Essential
As healthcare costs continue to grow –
the imperative is to take control
 Cost escalation in healthcare is unlikely to be effectively addressed
for decades
 Political resistance is likely to dilute and delay health reform efforts
 Expanded coverage costs will be shifted to employers by the
government and insurance companies
 It will take time to create real insurer competition and efficiency at
the state level
 Health insurance costs are damaging the effectiveness of
NA/ASAE organizations now
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Taking Control: National Assembly/ASAE Health
Insurance Program
 A captive insurance program will be
established in Washington, DC:
– It will offer a wide range of health plans tailored to
its members’ needs
– Members (as the owners) will be able to respond
quickly to any benefits of health reform
– The program becomes increasingly
cost effective over time as the group
grows
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What Is a Captive?
 An insurance or reinsurance company
 Specifically established to insure or reinsure the
risks of its parent or associated third parties
 Part of an organization’s risk financing repertoire
 Benefits of a captive are:
 To gain cost savings and to increase cash flow
 The ability to tailor-make benefit designs
 Tax advantages
 Transparency
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Major Captive Advantages
 Strength in numbers
 Spread of risk
 Access to more sophisticated
healthcare plans
 Members of the NA/ASAE program are owners of
the Captive Insurance program
 Advanced wellness and disease management
programs can be custom designed for the group
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Eventual Long Term Benefits
In the long run, the captive should allow the members to:
 Develop targeted health management mechanisms to save
additional costs
 Add additional liabilities or insurance such as:
Life
Vision
Accidental Death
Disability
Dental
Property & Casualty Risks
 Benefit from investment returns from accumulated reserves,
reduced risk charges and leveraging scale
 Pay dividends from revenue as the program becomes larger and
the risks more predictable
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History of Nat’l Assembly Captive

In 2006, 16 nonprofit agencies (National Assembly members)
investigated alternative health care options

11 agencies funded a detailed feasibility analyses to cover
4,000 employees – including AFB

Aggregate savings average 5.7% in year one

Research showed: $18M saved over 5 years

Insufficient employee reserves at that time for successful
program launch
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NA’s Health Insurance Captive
2010 Redux
 National Assembly members asked their association
to try again
 ASAE Joined with National Assembly….working
together with Spring Consulting Group
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Program's Structural Background
 Available to National Assembly members, nonprofit
associations and their affiliated members
 Potentially a wide choice of nine plan options
 Will have providers of administration and reinsurance
services
 Working with legal advice from McDermott, Will &
Emery, we are proposing a Group Captive, to be
domiciled and licensed in Washington, DC
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Phases in 2010
 Pre-decision Financial & Benefit Analysis
– New Feasibility Report (new participants)
– Undated Feasibility Report (earlier participants)
 Decision
– Commitment to launch (need threshold number of EEs)
 Implementation
– Captive setup, legal documentation, domicile plan
submission, board development, approval, employee
communication
 Launch
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Timetable: Completion Dates (with Phases)
PRE-DECISION
• Recruit members for the program
• Update financial analysis
May 2010
July
DECISION
• Approve implementation of the captive
August
IMPLEMENTATION
• Establish management entity and Board
• Finalize participants and numbers
• Approve legal documentation
• Confirm 2011 rates and contract with administrator
• Draft captive submission
• Obtain approval
• Employee communication
Launch Captive Insurance Program
August
August – September
September
September
September
September – October
September – December
January 1, 2011
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Costs
 Pre-decision Financial & Benefit Analysis 1
 For new participants
― $3600 : up to 100 EEs + $6/EE additional
 For participants who have already invested in the prior feasibility study
― $2400: up to 100 EEs + $4/EE additional
 Decision
 Commitment to fund going forward
 Implementation
 Formation cost: ~$15/EE 2
 Capitalization: ~$500,000 (entire Captive) 3
 Claims pre-funding: ~3 months’ premiums 4
 Launch – monthly premium payments
1 Payments
made in advance to Nat’l Assembly/ASAE or Captive once formed; cost as incurred
Implementation costs will depend on numbers of final participants. Initial feasibility, captive design and product
development have already been funded
3 Capitalization is $500,000 and remains in the captive as an investment owned by its members
4 Typically 3 months of estimated working rates are deposited into the Captive in advance
2
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The Next Steps: Evaluating this Program for
Your Organization
 Before you commit – learn about your specific benefits:
– Send Spring Consulting data on your health insurance
• Census, plan design(s) and current rates
• Claims history if available and current carrier
– Analysis costs will be based on your organization’s size (this will be
reimbursed from the Captive once the program is up and running)
 Participants will receive a custom risk/benefits report and
conference call with:
– Full details of program structure/ownership
– Recommended plan design(s) reflecting your current coverage
– Actuarial high level cost analysis and savings projections for your
organization
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Questions / Discussion?
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