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January 28, 2020

JHJ Magazine Benefits FAQ’s Johnson

The number one question our JHJ members have asked so far is:  “How can I know if this is for me if I don’t know what the benefits will be?” It’s the biggest question I get and it’s a great question. The answer is easy. The first step is an evaluation or “feasibility” study. To do this you will need all interested parties to provide information needed to get quotes from the markets (census, health questionnaire, current plan data, etc…). Providing information gives the underwriters an idea of what the risk looks like and they can provide quotes based on the actuarial values of the anticipated risk. At this point no one is obligated to participate so the underwriters know this and price accordingly. For the interested parties who provided information they can feel better knowing that providing information does not jeopardize anything they’re doing now and does not obligate them to participate once the plans and premiums are released. However, it’s important to communicate and make sure everyone understands that participation is the evaluation period is critical for getting to market quickly and getting the best rates in return. Each participant helps themselves and the entire group so this really is an “association effort”.

Is a PPO plan an option, or is it more likely to be an HMO? Just as fully-insured carriers such as BlueCross or Humana would provide PPO and HMO options with adjusted rates for each (based on reimbursement cost differences to providers), the association will have HMO and PPO options for their members to choose from. When we shop rates we also shop provider networks. We can use networks such as BlueCross (they lease their HMO and PPO networks) or we can lease independent networks such as Multi-Plan (the largest nationwide PPO network). The reality is many large insurance carriers lease networks themselves (Multi-Plan being the most common).

I understand that there are a lot of unknowns, but is there anything that is a known?  Is there anything you can share with us about the similar health insurance plan that is already in place for 2500 churches?

  • What is known is the statistical data of self-funding and the fact that the new association health plan regulations allow small employers and self-employed business owners to purchase health insurance collectively with the added benefits of a large group. When the group is large enough, as in the case of ARC and the Jeweler’s association, they can leverage the added benefits of self-funding.
  • Examples of known benefits would be facts such as:
  • The plan is not subject to state taxes and fees – generally 3% of the premium
  • The plan is not subject to federal ACA taxes and fees – generally 4% of the premium, increases each year indexed to growth of health care premiums nationally.
  • No carrier profit margins and risk assessment charges
  • The plan keeps profits in the good years – usually keeps in a reserve account to keep premiums low and/or with no annual increase. (stabilized rates year over year).
  • Prime example is our school board account, they have not raised rates on employees in 10 years (even during the ACA implementation while everyone else was getting double digit rate increases year over year).  The plan has richer benefits than any plan that can be bought today in the fully-insured market and there is over $4milliion remaining in the reserve account (extra money saved over the years) to continue to keep premiums low and benefits high.
  • Reinsurance protects the plan from losing money in the bad years.
  • Eventually everyone has a bad year. While you keep the profits in the good years, you protect against the bad years with re-insurance. This is one of the things we are shopping during the evaluation period. It’s factored into the total premium exactly the same way a carrier such as BlueCross would do. This is no different than any other insurance carrier. BlueCross, Humana, UHC, etc… They all carry re-insurance.
  • Interest earned on money pending to be paid out for claims as well as reserve fund money will earn interest which goes back into the plan. This again helps to keep the plan strong and rates low. Essentially, interest money goes back to benefit the members rather than the insurance company.
  • When you buy insurance from a carrier such as BlueCross, they keep the interest money.
  • I remember a few years back when BlueCross had a bad year and paid out every premium dollar they received in claims and administrative fees. They made no money yet they paid bonuses to all their employees because the reserve fund interest was $85 million that year. I literally remember watching them gather in the atrium at the main building to announce the bonuses. Unfortunately I was a 1099 producer so no bonus for me. 

I’ve heard a lot about Medi-Share plans.  Is this plan similar to the Medi-Share structure? Many have asked “is this a medi-share plan”. It’s important to communicate this is a true health insurance plan. This IS NOT a medi-share plan. This will look and feel just like your BlueCross, Humana, UHC or similar health plan you have today. Your insurance card will have many of the same network logos and work exactly the same as your current fully-insured health plan.

How do I know this is something that we might be able to take advantage of? Association health plans are new but self-funded health plans are not. The new association health plan regulations just allows small group and individuals to ban together now to form these large groups to benefit from what the large employers have enjoyed.