l. l. andreatta & associates livio l. andreatta, president advanced chartered benefit consultant...
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L. L. Andreatta & AssociatesLivio L. Andreatta, President
Advanced Chartered Benefit Consultant State Public Relations Officer & National Public Affairs Officer for
the National Association of Alternative Benefits Consultants (NAABC)
Special Consultant: Corporate Benefit Consultants Certified Senior Advisor (CSA) Financial Consultant Over 35 years experience in Group and Individual insurance and
corporate benefit plans. Member: Chicago Southland Chamber of Commerce
Of those covered by group health plans, 50% will spend less that $1,000 per year on their health care.
25% of those will spend NOTHING at all!
8% of those covered spend 70% of all the dollars spent on health care.
Employees pay for only about 20% of their health care expenses.
BASIC FACTS
20-30% of your premium is cost shifting and goes to cover Medicare and Medicaid due to inadequate government reimbursement.
Another 5-7% of premium cost shifting goes to cover the care of the uninsured at hospital emergency rooms.
HIDDEN TAXES
CONSUMER EDUCATION
In a recent study...
50% of respondents were uncertain how much they paid for their monthly health insurance premium.
55% were uncertain about their annual deductibles.
77% reported that they were less than sure of what the terminology used in their health insurance policy actually means.
80% do not know what PPO stands for.
Consumer Driven Health Plans
Individual & Group
Can we keep funding Health Care the way we are doing it now?
Six straight years of double-digit increases, with more projected.
Vision is seeing the future now and acting upon it.
How do you slow down utilization without rationing health care?
INSURANCE COMPANIES:
EMPLOYER EDUCATION:
AGENCY/AGENT:
KEY ELEMENT: CDHP’S have to have KEY ELEMENT: CDHP’S have to have $$ controlled by the employee with $$ controlled by the employee with incentives/rewards to use these dollars incentives/rewards to use these dollars more effectively. NO GIMMICKS!!!!!more effectively. NO GIMMICKS!!!!!
High deductible plans center piece.High deductible plans center piece. The human nature factor.The human nature factor.
1. The insurance company keeps the premium savings with the promise that they will reduce future renewal increases.
2. The premium savings are primarily directed to the employee and are put into a claims account they own and control. (HSA’s)
3. The premium savings are primarily directed to the employer and are put into an account the employer owns, but that the employee controls and has incentive to use more wisely. (HRA’s)
True HSA PlanTraditional Pre-paid Plan
Variation 2 Variation 3
Insurance Company
Co-Insurance
Deductible
Co-pays
Deductible
Insurance Company
Deductible
Insurance Company Insurance Company
Deductible
Co-paysRxRx %
Rx Co-pays
Office Co-pays
American Community HSA PlanTraditional Pre-paid Plan
Variation 2 Variation 3
Insurance Company
Co-Insurance
Deductible
Co-pays
Deductible
Insurance Company
Deductible
Insurance Company Insurance Company
Deductible
Rx
Co-paysRx %
Rx Co-pays
Office Co-pays$500
Preventive Care
American Community Common Family PlanTraditional Pre-paid Plan
Insurance Company
Co-Insurance
Deductible
Co-pays
Deductible
Insurance Company
Single $2,700
Rx Co-pays
Office Co-pays
Insurance Company
Family $5,450
Deductible
Insurance Company
Single $2,700
Insurance Company
Family $5,450
Deductible Deductible
American Community Embedded Family Plan
$2,700 $2,700
100%
KEY INTERNAL COST KEY INTERNAL COST CONTROL FACTORSCONTROL FACTORS
Discretionary medical costs vs. Discretionary medical costs vs. societal changes and attitudes.societal changes and attitudes.
“ “Whereas once health care and health Whereas once health care and health insurance were understood as activities insurance were understood as activities related to acute injuries and illnesses, they related to acute injuries and illnesses, they have expanded to include preventive and have expanded to include preventive and mental health services, long-term care, mental health services, long-term care, complementary medicine, and the ability complementary medicine, and the ability to maintain psychological, social, spiritual, to maintain psychological, social, spiritual, and sexual performance far into the golden and sexual performance far into the golden years.”years.”
James C. Robinson, PhDJames C. Robinson, PhD
Entitlement Factor in AmericaEntitlement Factor in America
Corporations are Bottomless PitsCorporations are Bottomless Pits Unrestrained DesiresUnrestrained Desires ““Want-it-All” AttitudesWant-it-All” Attitudes
Consumers are not paying the billsConsumers are not paying the bills
No Skin in the Game!!!No Skin in the Game!!!
What it Really Costs!!!!!What it Really Costs!!!!!
Average Doctor’s Office Visit (w/tests) $250Average Doctor’s Office Visit (w/tests) $250
Average Co-Pay Average Co-Pay $10-30 $10-30
Phase Industry is Now InPhase Industry is Now In
Bringing consumers into the game Bringing consumers into the game
as educated and informed purchasers…as educated and informed purchasers…
Key To This TransitionKey To This Transition
EDUCATION !!!!!!EDUCATION !!!!!! EDUCATION !!!!!!EDUCATION !!!!!! EDUCATION !!!!!!EDUCATION !!!!!!
As consumers, the idea of people learning how to save their own money is powerful
KEY INTERNAL COST KEY INTERNAL COST CONTROL FACTORSCONTROL FACTORS
Discretionary medical costs vs. societal Discretionary medical costs vs. societal changes and attitudes.changes and attitudes.
Reigning in Rx cost explosion.Reigning in Rx cost explosion.
REIGNING IN Rx COSTS REIGNING IN Rx COSTS
Rx costs have increased from 5% of total Rx costs have increased from 5% of total claims in 1990 to over 18%.claims in 1990 to over 18%.
More money is spent on advertising Rx’s More money is spent on advertising Rx’s than on research & development.than on research & development.
Market forces and education have to be Market forces and education have to be brought into this Rx equation. brought into this Rx equation.
Can your company continue to Can your company continue to
take these projected increases take these projected increases
without changing your strategy?without changing your strategy?
Address Cost Address Cost The Employer’s OptionsThe Employer’s Options
Drop CoverageDrop Coverage Absorb the costs themselvesAbsorb the costs themselves Pass premium costs on to their Pass premium costs on to their
employeesemployees Reduce benefitsReduce benefits
or
Try a bold new approach that gives Try a bold new approach that gives
employers more control over cost employers more control over cost
while giving more choice to while giving more choice to employeesemployees
SOLUTION:
GETTING BACK TO RISKED BASED
INSURANCE
$0 $0 0.020 0.080 -$ -$ 2,100.00$ 168.00$ 0-1,000 600 0.190 0.275 114.00$ 165.00$ 1,500.00$ 413.00$
1,000-2,000 1,500 0.150 0.240 225.00$ 360.00$ 600.00$ 144.00$ 2,000-3,000 2,500 0.130 0.100 325.00$ 250.00$ -$ -$ 3,000-4,000 3,400 0.100 0.040 340.00$ 136.00$ -$ -$ 4,000-5,000 4,400 0.085 0.040 374.00$ 176.00$ -$ -$ 5,000-7,500 6,000 0.104 0.055 624.00$ 330.00$ -$ -$ 7,500-10,000 8,500 0.080 0.045 680.00$ 383.00$ -$ -$ 10,000-15,000 12,000 0.070 0.056 840.00$ 672.00$ -$ -$ 15,000-25,000 19,000 0.046 0.044 874.00$ 836.00$ -$ -$
25,000 + 60,000 (59,000) 0.025 0.025 1,500.00$ 1,475.00$ -$ -$
1.000 1.000 5,896.00$ 4,783.00$ n/a 725.00$ 5,083.00$ 2,945.00$
This table suggests that 74% of all claims submitted fall under the family deductible of $3,500 and are neverrecorded against the actual insurance policy. Furthermore, a significant amount of claims formerly above $3,500especially those of $10,000 or less could be either below the $3,500 deductible or reduced after the HSA is introduced. Even some claims above $10,000 might be reduced to a lesser degree. For claims above $15,000 onlya small reduction, if any, is expected. Some reductions in inpatient hospitalizations may occur, but a reductionin outpatient utilization is more likely.
TotalClaims Cost for Insurance Policy
Range of Annual Cost per Family Average Cost
Probability
Before HSA
After HSA HSA Balance
HSA Cost
Cost in Range
Before HSA After HSA
Milliman & Robertson, Inc.
THREE LITMUS TESTS THREE LITMUS TESTS FOR CDHP’sFOR CDHP’s How does your plan design treat How does your plan design treat
employees with catastrophic or chronic employees with catastrophic or chronic conditions?conditions?
THREE LITMUS TESTS THREE LITMUS TESTS FOR CDHP’sFOR CDHP’s How does your plan design treat How does your plan design treat
employees with catastrophic or chronic employees with catastrophic or chronic conditions?conditions?
How does it treat the 55+% of employees How does it treat the 55+% of employees who spend less than $1,000 per year?who spend less than $1,000 per year?
THREE LITMUS TESTS THREE LITMUS TESTS FOR CDHP’sFOR CDHP’s How does your plan design treat How does your plan design treat
employees with catastrophic or chronic employees with catastrophic or chronic conditions?conditions?
How does it treat the 55How does it treat the 55++% of employees % of employees who spend less than $1,000 per year?who spend less than $1,000 per year?
How does it curb the abuser/user?How does it curb the abuser/user?
HOW IT WORKS:HOW IT WORKS:
100%PREMIUM
$
$Use 60% of premium
to pay forCatastrophic Insurance
90% Rx, treatments, surgeryHospital, doctor,
lab tests
$250 deductible
Rx $10/$20/$35 co-pay
ER $75 co-pay
Office Visit $20 co-pay
100%Rx, treatments, surgery
Hospital, doctor, lab testsNO CO-PAYS
$2,000/$2,250/$2,500 Deductible
Fund actual claims under deductibleRx, treatments, surgery
Hospital, doctor, lab tests
HRA REDUCED PREMIUM HRA BENEFIT DESIGN $5 MILLION
How does the HRA concept work?
10%$1,000Out-of-pocket
PPO PREMIUM PPO BENEFIT DESIGN $5 MILLION
Owner’s choicewhen used
REDUCED
BY
40%
Unused premiums are retained in
your checking account$___________Out-of-pocket
Most Expensive of Health Care Designs Most Expensive of Health Care Designs are called “Prepaid Medical”are called “Prepaid Medical” PlansPlans
1. Deductible1. Deductible
2. Office Co-Pays2. Office Co-Pays
3. Co-Insurance3. Co-Insurance
4. RX Cards 4. RX Cards
5. Typical Out of Pocket5. Typical Out of Pocket
Dollars
100% PREMIUM $ Surgery Hospitalization Office co-pays ER co-pays Treatments X-rays Lab Tests Specialists Rx co-pays Large Claims
Small Claims
Use 60% of premium $to pay for
Catastrophic Insurance
90% Rx, treatments, surgeryHospital, doctor, lab tests
10% out-of-pocket
$250 deductible
Rx $10/$30/$50 co-pay
ER $75 co-pay
Office Visit $20 co-pay
100%Rx, treatments, surgery
Hospital, doctor, lab testsNO CO-PAYS
$2500/$5,000 Deductible
Fund actual claims under deductibleRx, treatments, surgery
hospital, doctor, lab testsetc.
HRA Reduced Premium HRA
How does the HRA concept work?Pre-Paid PPO Premium PPO Benefit Design
REDUCED
BY
40%
Unused premiums are retained in
your checking accountOwner’s choice when used
Why do we have health insurance?
Most people can’t afford to write a check for
$50,000 - $100,000 - $1,000,000
Those covered never see the actual cost
of their health care
Most don’t care...as long as they’re covered
Facts
You only pay for what you use
Remaining unused HRA funds at the end of each year roll over
and are retained in your checking account.
INSURED NEVER SEES THE ACTUAL COSTS OF
TREATMENTS,OFFICE VISITS, AND
PRESCRIPTION DRUGS
Employer Can Decide Design. Pay same Claims, Employer Can Decide Design. Pay same Claims, BUT in a Different MannerBUT in a Different Manner
HSAHRA
Dollars
EmployeeDollars
Insurance
Employer Dollars
1. Premium Savings2. Tax Savings3. Key Point – Claims
Paid when used.
BOTTOM LINE… ON AVERAGE, COMPANY WILL SAVE BETWEEN $1,000 TO $3,000 PER PERSON PER YEAR.
G & G MFG Renewal 11-01-2008G & G MFG Renewal 11-01-2008
CarrierCarrier AC PreviousAC Previous $141.25$141.25 $353.14$353.14 $277.19$277.19 $494.39$494.39
AC RenewalAC Renewal $151.14$151.14 $377.86$377.86 $302.28$302.28 $529.00$529.00
AetnaAetna $240.00$240.00 $457.00$457.00 $404.00$404.00 $662.00$662.00
Blue CrossBlue Cross $296.14$296.14 $666.32$666.32 $666.32$666.32 $799.58$799.58
HumanaHumana Declined to quote – rates not competitive Declined to quote – rates not competitive
PhysiciansCarePhysiciansCare $215.17$215.17 $418.19$418.19 $379.32$379.32 $647.07$647.07
StarmarkStarmark $174.31$174.31 $401.49$401.49 $343.76$343.76 $570.94$570.94
UnicareUnicare $170.91$170.91 $396.60$396.60 $396.60$396.60 $506.53$506.53
With your Starmark traditional plan, you would have spent With your Starmark traditional plan, you would have spent $78.458.76 $78.458.76 on premiums for 2008on premiums for 2008 With your American Community HRA, you have spentWith your American Community HRA, you have spent $44,070.72 $44,070.72 on premiums for 2008on premiums for 2008 You have saved You have saved $34,388.04 $34,388.04 on premium over the past 12 monthson premium over the past 12 months Your employees utilized 13,000 in HRA reimbursements through your renewal date.Your employees utilized 13,000 in HRA reimbursements through your renewal date. That means you have kept overThat means you have kept over $21,000 $21,000 in your checking account during your first year of your HRAin your checking account during your first year of your HRA Your 7% renewal increase amounts toYour 7% renewal increase amounts to $3,084.95 $3,084.95. With your Starmark plan, this 7%% increase would . With your Starmark plan, this 7%% increase would
have amounted to have amounted to $5,492.11$5,492.11. . Your Starmark renewal premium would have been Your Starmark renewal premium would have been $83.950.87$83.950.87 Your American Community HRA plan renewal is Your American Community HRA plan renewal is $47,155.67$47,155.67 That’s an additional savings of That’s an additional savings of $3,679.52$3,679.52
This brings your actual total annual savings for your first year to over This brings your actual total annual savings for your first year to over $24,679.00$24,679.00
SOME FUTURE ISSUESSOME FUTURE ISSUES
Cost Shifting by the Government!!!Cost Shifting by the Government!!! Reducing Rx Costs.Reducing Rx Costs. Tort Reform.Tort Reform. Flexibility on State Mandates.Flexibility on State Mandates.
How Do You Start This How Do You Start This Educational ProcessEducational Process
Contact
Livio Andreatta, ACBC, CSALivio Andreatta, ACBC, CSAL. L. Andreatta & AssociatesL. L. Andreatta & Associates
Illinois Office: (708) 647-9353Illinois Office: (708) 647-9353
Michigan Office (269) 928-2901Michigan Office (269) 928-2901
Cell: (708) 932-5167 Cell: (708) 932-5167
e-mail: [email protected]: [email protected]