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The Compound Savings of SharedFunding

The value of SharedFunding is that it creates a gap between what you were paying for traditional insurance and what you pay with SharedFunding.

Unfortunately it’s typical for insurance costs to increase annually. However, we’ve found that by creating a gap with SharedFunding, that increase can be on less premium.

Traditional Insurance

You’ll be glad you brought it! Photo by Ricardo Resende on Unsplash

When you have traditional insurance, you need to buy the plan that you want to offer your employees. Makes sense, yes? The problem is that you are paying for this plan for every employee regardless if they use it or not.

The real benefit of insurance can be compared to an umbrella. You’ll be glad you have it with you when it downpours. Additionally, you’ll never mind when the sun comes out and you are carrying your umbrella.

At BBG, Inc., we’ve come up with a way to provide the protection of an umbrella at a fraction of the cost of traditional insurance.

SharedFunding

With SharedFunding, you can reduce the high premiums you are paying to the insurance company by buying catastrophic coverage. You are still buying an umbrella but just with a little more gap between you & the umbrella.

Typically we recommend purchasing the highest deductible available ($5,000, $6,350, $6,650). However, BBG will work with you to determine the appropriate amount of risk.

Then we’ll build out the plan that you want to promise your employees and deliver it to them. This is called SharedFunding:

  1. You buy catastrophic coverage from the insurance company
    • Your annual premium costs go down ↓
  2. We deliver the plan you want to your employees
    • It’s a promise to pay rather than buying from the insurance company

But won’t we fund the difference back in claims?

Healthcare is used unevenly and in the 14 years we’ve been doing ShareFunding, no client has ever funded back the entire premiums savings in claims.

Here is a simple example:

Things are starting to look up. Photo by Jude Beck on Unsplash

Let’s say that traditional insurance costs you $1.00 (haha, I know what world do I live in?? Just trying to keep it simple).

BBG comes in and recommends you buy the highest deductible possible for $0.60. Right now things are looking up as you’ve reduced your healthcare costs by 40%.

The next step involves building the SharedFunding plan you would like to promise to your employees. BBG can build any type of ShareFunding plan you’d like. Most employers choose to mimic their former traditional plan. This way employees still get the same benefit they are used to receiving.

Most likely you’ll end up funding approximately $0.20 in claims for employees who utilize the SharedFunding plan.

That brings your final cost up to $0.80 for a 20% savings. Not too bad, eh?

The Compound Savings of ShareFunding

Saving 20% on your healthcare costs when you initially set up SharedFunding is lovely, yes? But what makes it even lovelier is what happens in the years to come.

Since pictures speak 1,000 words, let me explain with a graph:


Here at BBG we tend to look at the average cost per employee per year as a benchmark. The reason is that your enrollment fluctuates each year. You can calculate your average cost per employee per year by taking your total costs divided by your current enrollment.

The above graph includes numbers from a real client who has been SharedFunding since 2012.

As you can see their average cost per employee per year were at $15,197 with traditional insurance in 2012/2013. By switching to SharedFunding that year, we were able to reduce that number by 39%. Whoa!! Then in 2014/2015 they embraced a more robust form of SharedFunding and reduced their cost another 21%.

While we are pretty good, we are not magical. Unfortunately, you’ll notice their healthcare costs did rise through the years with SharedFunding. However, the true value of SharedFunding is that your increases are on a smaller premium amount; hence, the compound savings of SharedFunding.

To show this we assumed they would have received a trend increase of 5% each year if they had stayed on the traditional route. Based on past renewal trends, this was an appropriate average increase to assume.

Firstly, they are not even close to what their average cost per employee was in 2011/2012. Secondly, while both graphs go up the gap between them grows!

Closing Thoughts

Healthcare is likely one of your biggest expenses as an employer. The math of self-funding may not work for small employers, but the math of SharedFunding most likely will.  Here are BBG, we have fun delivering strong benefits to your employees while reducing the amount of premium you pay to the insurance company.

Your employees will still have access to the network that the insurance carriers provide. Additionally, you will be protected from catastrophic claims with a mini stop loss in purchasing a high deductible plan from the carrier. Furthermore you can deliver the same benefits to your employees by promising to fund. Lastly, with a promise to fund, you, the employer, will be able to retain more dollars in your business.

If you are interested in seeing if SharedFunding might be a good fit for your company, don’t hesitate to reach out to us for a no obligation analysis.

Lastly, we will be running a series on SharedFunding and in this series we plan to get into the details on a more granular level.

The Wide Variation In The Price Of Diagnostic Tests Is Unrelated To Outcomes Or Quality Of The Provider: So Why Do We Pay More?

A study of spending on 12.5 million diagnostics tests by UnitedHealthcare once again revealed substantial variation in the prices patients pay for common diagnostic tests. The seven groups of common diagnostic tests included echocardiograms, mammograms and ultrasounds.

The price range for an echocardiogram — $210 to $1,830 – typifies and illustrates the wide variation in the price for common diagnostic tests. And, according to the report, the higher prices did not correspond to improved patient outcomes or to the quality of the provider.

So Why Do We Pay More?

“A more likely reason is that health care providers generally are incentivized to use their market power to increase prices, often resulting in overpriced services,” per the report.

A copy of the report can be found here.

We’ll write more in upcoming Two Minute Drill articles about what you can do to avoid the higher prices. You’ll learn how BBG paves the way for our clients via our SharedFunding program. They consistently experience lower costs without sacrificing quality of care.

  

“A more likely reason is that health care providers generally are incentivized to use their market power to increase prices, often resulting in overpriced services,”

When It Comes To Lowering Healthcare Costs Do Workplace Wellness Programs Over-Promise And Under-Deliver?

Don’t get me wrong, I completely support the notion of promoting positive health behaviors and healthier lifestyles. Encouraging such things as regular exercise, good and balanced nutrition, the proper amounts of sleep, and all the things associated with taking better care of ourselves is all good. No question about that.

It’s just that for the most part you could color me the doubting Thomas when it came to believing the narrative that wellness programs definitively lead to lower insurance premiums and other healthcare-related cost savings.

And, it seems that most often that’s how wellness programs have been sold to employers. “Implement a wellness program and you will lower your company’s insurance premiums and other employee health-related costs” has commonly comprised a major part of the wellness sales pitch made to employers.

And many employers, especially large employers, have been buying this cost savings aspect of it. (80% of large employers in the U.S. offer wellness programs*).

I’ve long wondered if these corporate wellness programs provided any direct return on an employer’s investment (Workplace wellness is an $8 billion industry*). We sure haven’t witnessed it either in the way of lower insurance premiums or a decrease in the consumption of medical services and medical claims.

Harvard provides an answer via a major study on the Health and Economic Outcomes of Workplace Wellness Programs.

Results of the Harvard study were recently published in The Journal of the American Medical Association (JAMA). In a nutshell the Harvard study concluded that while there were significantly greater rates of some positive health behaviors among participating employees, there were no significant effects on health care spending.

In other words, when it comes to wellness programs and savings, the Harvard study verdict is in. Under-deliver.

For more on the Harvard study click here.

*Source: Axios

Déjà Vu, Again – Small Group Transitional Relief Plans (pre-ACA) Extended Through 2020

Buried far below the most recent headlines related to eliminating the ACA, The Centers for Medicare and Medicaid (CMS) once again announced that employers in the small group market still enrolled in Transitional Relief Plans (pre-ACA) may keep their existing policies and plans for another year. CMS stipulates that ultimately the discretion for granting an extension again rests with state regulators and the respective participating insurance carriers who continue to make those plans available.  As we learned last year a few insurance carriers (e.g. Aetna) elected not to extend the Transitional Relief Plans beyond 2018. They instead chose to eliminate the option of renewing the old plans thus requiring impacted employers to move to ACA plans or one of the market compliant alternatives (e.g. level funding, MEWA, etc).

For more info click on the link below:

Extended Non-Enforcement of Affordable Care Act-Compliance With Respect to Certain Policies

Three Notable Employer Health Coverage Factoids In The News This Week……

…… that may be of interest only to me.

Amazon, Berkshire Hathaway and JPMorgan Chase Finally Has a Name

It only took eight months. The new nonprofit healthcare company founded by Amazon, Berkshire Hathaway and JPMorgan Chase finally has a name. It will officially be known as “Haven”. (Maybe it’s just me, but with all the introductory splash and all the money being thrown at this thing, but ”Haven”? Conjures up visions more of a retirement home or maybe an RV resort somewhere just of I-95 rather than healthcare innovator.)

Not much is known about Haven. Data, technology, improving employer healthcare, and not-for-profit is about all we know at this point and that’s according to Haven head guy Atul Gawande.

Two unrelated but interesting things to note about Haven:

  1. The nation’s largest health insurer, UnitedHealthCare, views Haven as a competitor. And,
  2. It wasn’t that long ago (last summer) that billionaire leader of Berkshire Hathaway and Haven co-founder, Warren Buffett, indicated that a single payor healthcare system may be the most effective system for cutting healthcare costs.

Not sure what to make of it or how it will ultimately affect the group health market but it’s still interesting.

Is Health Market Fragmentation the Culprit? The Main Driver of High Costs?

Following up on Buffett’s take, I read this week that the fragmented nature of the U.S. healthcare system (from employer-sponsored group coverage to the individual market to Medicare, and Medicaid, and the V.A., and coverage for Native Americans – is primarily responsible for today’s high cost of healthcare coverage? Could that be an over simplification? How would simply merging those lead to lower costs?

We’ll leave that for others to figure out.

In the meantime, we’ll just keep working hard on finding new and meaningful ways to mitigate the high cost of coverage for our employer groups and their employees.

Buying and Selling Health Insurance Across State Lines

The Interstate sale of health insurance is back in the news this week with the government’s release of a fifteen-page document requesting commentary. Some see this as surefire way to increase competition and ultimately lower the high cost of health coverage. Others see it as simply adding more chaos without much gain. My sense is maybe both. Some short term gain as well as adding to the chaos. Overall, seems like at best it may temporarily treat a symptom but doesn’t won’t move the needle much toward a cure.

We’ll see if it gets traction.

If it does get traction it will be interesting to track the unintended consequences as, sure as shootin’, there will be some.

65Plus Is The Hottest Labor Market Demographic. Here Are Key 2019 Medicare Costs That Employees And Employers Should Know.

Some say it’s the hottest demographic in the labor market — men and women ditching traditional retirement age to work into their 70s, 80s and sometimes beyond.   According to the Bureau of Labor Statistics the 65 and over crowd will make up the fastest-growing segment of the workforce over the next decade.  With that in mind, over the next few months we’ll be providing key bits of information that employers and employees may find helpful as they navigate the best and most cost effective options for health coverage for the 65Plus workforce and their dependents.

First off, 2019 cost considerations for “traditional Medicare”:

2019 Medicare Costs + Coverage

PART A PREMIUM (Hospital Insurance)
Most people don’t pay a monthly premium for Part A (paid Medicare taxes for more than 39 quarters.  If 39 or fewer quarters worked they’ll pay a premium of up to $437).

PART A DEDUCTIBLE + COINSURANCE
– $1,364 deductible for each benefit period
– Days 1-60: $0 coinsurance for each benefit period
– Days 61-90: $341 coinsurance per day for each benefit period
– Days 91 and beyond: $682 coinsurance per each “lifetime reserve day” after day 90 for each benefit period (up to 60 days over your lifetime)
– Beyond lifetime reserve days: all costs

PART B PREMIUM (Medical Insurance)
The standard Part B amount is $135.50 (or higher depending on your income).

PART B DEDUCTIBLE + COINSURANCE
– $185 deductible per year
– After deductible is met, enrollees typically pay 20% of the Medicare-approved amount for most doctor services, outpatient therapy, and durable medical equipment (DME).

2019 PART B + PART D (Prescription drug coverage) INCOME-RELATED MONTHLY ADJUSTMENT AMOUNT (*IRMAA PREMIUMS)
An additional amount that some individuals whose modified adjusted gross income (MAGI) is above certain thresholds will pay for their monthly Part B and Part D premiums.

  • 2019 Medicare Part B (Medical Insurance) Income Related Adjustments
FILE INDIVIDUAL TAX RETURN FILE JOINT TAX RETURN FILE MARRIED + SEPARATE TAX RETURN MONTHLY PREMIUM IN 2019
$85,000 or less $170,000 or less $85,000 or less $135.50
above $85,000 up to $107,000 above $170,000 up to $214,000 Not applicable $189.60
above $107,000 up to $133,500 above $214,000 up to $267,000 Not applicable $270.90
above $133,500 up to $160,000 above $267,000 up to $320,000 Not applicable $352.20
above $160,000 and less than $500,000 above $320,00 and less than $750,000 above $85,000 and less than $415,000 $433.40
$500,000 or above $750,000 and above $415,000 and above $460.50
  • 2019 Medicare Part D (Prescription drug coverage) Income Related Adjustments
FILE INDIVIDUAL TAX RETURN FILE JOINT TAX RETURN FILE MARRIED + SEPARATE TAX RETURN MONTHLY PREMIUM IN 2019
$85,000 or less $170,000 or less $85,000 or less your plan premium
above $85,000 up to $107,000 above $170,000 up to $214,000 Not applicable $12.40 + your plan premium
above $107,000 up to $133,500 above $214,000 up to $267,000 Not applicable $31.90 + your plan premium
above $133,500 up to $160,000 above $267,000 up to $320,000 Not applicable $61.40 + your plan premium
above $160,000 and less than $500,000 above $320,00 and less than $750,000 above $85,000 and less than $415,000 $70.90 + your plan premium
$500,000 or above $750,000 and above $415,000 and above $77.40 + your plan premium

 

Next Up:  The eligible employee’s three main options when it comes to their employer-sponsored plan and/or Medicare coverage.

 

2019 Medicare_and_You_2019

 

$19,616.00. Yes, You Read It Correctly — $19,616.00.

$19,616 — that’s the average cost nationwide of an employer-provided family health plan in 2018 according to recent employer study conducted by the nonprofit Kaiser Family Foundation and reported in today’s Wall Street Journal.  It’s pretty staggering to think about the fact that $19,616 is only the average and that there are more than a few folks across the country paying a lot more than the average.

The dirty little secret that’s fast becoming less of a secret is that hospitals charge health plans anywhere from 2 to 5 times more for hospital services than they charge Medicare.

Health Insurance Multiple Choice Question

Per the WSJ article,  a “major driver of employer premium growth over the years has been the prices that insurers and employers pay for health care”.

For several years now, and possibly even more so today, the increasing prices for hospital-related services and hospital stays have been the major cost driver of insurance premiums for private insurance coverage.  The prime drivers for the hospital price hikes include hospital pricing for emergency-room visits, surgical hospital admissions and administered drugs.

Hospital pricing is especially crazy.  This is particularly true as it relates to the health plans that employers provide to the approximately 150+ million Americans that rely on employer-sponsored health plan coverage.    The dirty little secret that’s fast becoming less of a secret is that hospitals charge health plans anywhere from 2 to 5 times more for hospital services than they charge Medicare.

We’ll be reporting more about this conundrum that is hospital pricing and what’s being done to combat or rein in the crazy pricing in upcoming posts.  

$19,616.

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