Q&A

Question 1

Why does it take so long to get dividends?

Answer 1

• Long term strategy bc its not immediate gratification. Excited to give out dividends but some accounting that goes into it. Members have final say in when it is paid back
  
  • Members also need to vote to close out an UW year
  • Runout of claims (3 months for newer groups)
  • Claims closed
  • CRI audits and then audits externally (PWC?)
  • Assessments handed out 6 months ( a month after board mtg - April)
  • By now missed initial board meeting so vote at NEXT
    Dividends come a few months after that

Question 2

Why do operating costs vary so much compared to the casualty side?

Answer 2

• Because each member chooses their own deductible in MSL, they are underwritten accordingly and the premium/operating costs vary (all the same risk on the casualty side)

Question 3

What is IBNR? Incurred but not reported

Answer 3

• Not as big of a discussion in MSL than casualty because claims have to be made in a certain period of time, but it is still a component. Every year we receive the IBNR from the carrier and that is added to financial statements as a liability. When we close the UW year, the IBNR is wiped out and reported to 0
  ○ Claim that is late reported - never knew about it during the policy period and it just showed up really late
  ○ Claim that develops larger - We think the claim will cost 800k because we know the treatment plan for their condition, but turned out to be 1.2M, then the 400k is IBNR
  Claim Reopens - thought was over but another bill comes in - Reopens up later on

Question 4

What is Commutation and what is Novation?

Answer 4

• (WellHealth) When we get to our 17 months after expiration, we look to see if anything is on the books still. If yes, we get it closed out asap and then we ask Berkley if there is anything else they are worried about for that year. When they say no, they zero out the IBNR and then Wellhealth enters a commutation - this is where we commute that layer of responsibility that the captive had back to Berkley. This way, in the future if something DID open back up, the captive would no longer be liable because we commuted that year back to Berkley
  
  • Commute the year with the current carrier
  • Novation - if an independent insurance carrier came in (not Berkley) and they came in to take the risk on behalf of the captive
  • We do commutation with Berkley and it’s interesting because no dollars exchange hands in order for us to do the commutation
    In the casualty side, since IBNR is much more prevalent, in order to commute the year there are significant dollars being exchanged between the captive and the insurance carrier taking over the risk

Question 5

What is a claims indemnification is? And What is an Experience adjustment?

Answer 5

• Experience Adjustment (Proposal term of Assessment) - in our proposals, when we talk about the potential to pay in additional amount (assessment). It’s an experience because it’s associated to them using up their loss fund. The adjustment is that they have to pay more in because of that
  
  • Claims Indemnification (Financial/Accounting term of Assessment) - Account looks at it this way. The captive was indemnified by the member because of the additional losses they had of using up their loss fund.

Question 6

Deficit Reallocation

Answer 6

• Financial Term for Risk Sharing
  When a company has created a deficit because they’ve maxed out, it gets reallocated to the other members of the program

Question 7

Contribution to operating costs vs actual operating costs

Answer 7

• In the proposal letter we say that the members final costs may vary 1-3% (because of the offshore expenses are not fixed)
  
  • Within the proposal, we have dollars flowing to Kensington and those are inclusive of operating cost differential. This means we know there is going to be a differential but we don’t know what it’s going to be
  • We don’t want to charge too much money and give it back (want to keep money in their hands) so we charge them an chunk of the amount. When looking at the operating costs of the captive at year end, they will generally be a little higher than what was originally set aside. This gets taken care of at the time of the UW year close.
  • When looking at companies equities (in financials) you’ll see contribution to operating costs (original dollars collected) vs. Actual Operating costs
  • BOD meetings for example, you don’t know exact spend, so these things swing from year to year
  • We always know there will be a difference each year and we don’t want to over collect so we handle the difference at the time of closing of the year
    If costs are LOWER (COVID year), they are just allocated back to the members

Question 8

Can a laser ever go away?

Answer 8

• Depends on Underwriting
  
  • If they go off the plan or get better - that individual’s cost can get absorbed in the current spec
  • If not, No - but it can be adjusted. If your costs go down on this person with prescription intervention
  • No new laser guarantee is a member decision - provision in the captive
    ○ 2 of our captives had members vote on this provision
    Very likely happen to another in the next year or so

Question 9

Why cant I have a deductible over 400k?

Answer 9

○ when deductible gets too high, unbalances the funding mechanism for the captive
○ This range makes the most sense for captive
Also needs to be reasonable for the size of the group (i.e. wont have a 50 person group with a 250k deductible)

Question 10

What does Kensington do

Answer 10

Kensington - Management Company (day-day operations that oversees captive)
* Minutes all the BOD meetings
* Keeps official records of captive
* Execute the reinsurance agreement on behalf of the members (assistant corporate secretary of captive)
* Pay dividends
* Organize appointment of Directors
* Pays distribution and collects assessment from members
* Liaisons with CRI
* Liaisons with Audit firm (Which prepares the financial statement for captive)
* Liaisons with Berkley
* Liaisons with members
Work with CIMA`

Question 11

Why no new laser in the first year?

Answer 11

• Most PH members coming from FI, we don’t have a lot of data to review and accurately project out the risk
  We have to make sure the captive is protected come year two after a year of data

Question 12

What drives better performance in captives?

Answer 12

• Collaboration within captives
• Sharing risk with other members so everyone’s motivated to drive down costs and roll up sleeves to do that hard work

Question 13

We do work as the broker how do we fit in?

Answer 13

• You are more important than ever especially coming from the FI world, lots of options now
• We have resources if needed but really comes down to the broker to be providing recommendations and implementing the right solutions
  That broker relationship remains key in this success

Question 14

How much work is involved?

Answer 14

• There is a little more work - moving from FI space
• You get out what you put in - some low hanging fruit just moving SF in general for cost savings
• Implementing services isn’t difficult, your brokers there to assist, CRI can help but might take a little more work on your end
  Not something you’d need to hire a new full time employee or change someone’s job description

Question 15

How often does someone have an agg hit?

Answer 15

• Not very often
  Members enjoy having the protection if they do happen, often added on as a low cost

Question 16

Captive Co participation

Answer 16

Risk Sharing

Question 17

How does my broker get paid?

Answer 17

• You’ll work with your broker on that - Mr. Broker any thing to add on that?
  
  • If asked, convert commission into a PEPM -> flat amount
    Quote is net of commissions, we see partners add PEPM to TPA or administrative fee but should be revenue neutral to make the change

Question 18

How does pro-rata basis work?

Answer 18

• If a member hasn’t depleted their loss fund and been assessed to the max, they will step in and help
  Based on the loss fund amount (ceded premium)

Question 19

How do we make our money?

Answer 19

• CRI is paid a fee as a consultant to the captive, it will be outlined in the quote not trying to hide it

Question 20

Mandatory time to stay?

Answer 20

No penalty for leaving early but it is a long term play. Like for members to give it 3-5 years to really see the effects. Doesn’t happen over night - slowly integrate solutions

Question 21

Can kick people out?

Answer 21

Hasn’t’ happened yet - members could vote to allow this but not letting just anyone in. Could be you with the bad year and the point is to insulate each other. Premium adjusts over time, makes up for changing demographic. BUT have the power to vote out if a member is disruptive at mtgs or causing problems

Question 22

Why should I want to share risk with people I don’t know/Why is Risk sharing a good thing

Answer 22

• Something I like to point out is that no matter if you’re fully-insured, self-funded, whatever it is, you’re always going to be sharing risk with other companies. The key difference of the captive however, is that you now know exactly who you’re sharing risk with. There’s also an added layer of incentive for this risk pool to work hard to drive down their claims spend, because just like you, they want to get those loss fund dollars back in the form of a dividend too.
  
  • In traditional market - think about how much risk sharing happens with people you DON’T KNOW
  • Provides stability and protection - bad year is only 1/5 and you’ll know the cost max

Question 23

Investment income

Answer 23

• Investment income is tax deferred (as a captive) until it is distributed - then it is taxed as ordinary income
  
  • Investment income to the COMPANY not to each member
  • Normal insurance policy AND Shareholder in the reinsurance company
    ○ Stop loss policy is handled the same, the captive is just a financial component behind the scenes
    ○ Investment paid every few years when members feel it’s appropriate and distributions go out alongside dividends
    § Some good years some bad so makes sense to wait until there is significant profits to distribute

Question 24

Why Berkley?/Shopping stop loss

Answer 24

• Fronting carrier - they lat off the first layer of risk to the captive and take risk excess the captive layer
  
  • A+ Rated carrier unique in that they are made up of 55 different insurance companies
  • Been in MSL for 15 years
    Not just a stop loss carrier, but true partner for us. We know how they are to work with and believe they are fair for renewals, pay for Springbuk in PH, Been in the captive space for years. If we marketed, might get 5% off stop loss but take the risk of not being as easy to work with

Question 25

We are already doing this with cost containment strategies

Answer 25

• So happy you are already doing some of this - That’s great! There is so much more on the table for you that comes with the transparency and control within the captive layer and already set up for success so excited to see you reap the benefits

Question 26

What are tax advantages?

Answer 26

• Not avoiding taxes
• No Corporate tax in Grand Caymen so Captive is not taxed, but there is an insurance license fee they have to pay CIMA on an annual basis but since members are located in the US they are taxed in the US when profit is recognized
• Taxes still involved (FET + Taxed on dividends)

Question 27

What about 831(b)’s

Answer 27

• Biggest source of confusion is around these
• It is a tax funding strategy (program) that people were using the wrong way outside of CRI and tarnished the industry
• We do offer these but not an expert in it
  No tax focus to our MSL Captives, just a better strategy to take back control of total health spend

Question 28

CIF Qualifications?

Answer 28

• 1M of available cash in program to qualify to invest in the CIF (kensington holds some back)
• 2M to be on quarterly calls
• 10 Million for a board seat
  
  • Review equity Managers etc.
  • WellHealth haws a member as a director on the CIF Board. PH will soon
    Distributions allocated based on loss fund amounts, capital, and cash in their name

Question 29

Why captive instead of just SF?

Answer 29

On island sf - have a large claim sf carrier attacks with renewal
PH we are there to suport eahc other -

Question 30

What does CRI do

Answer 30

Helps companies control their insurance spend on the casualty side and their health care spend on the MSL time by creating member owned insurance companies of which, each company is an owner of

Question 31

I’m an employer and been with BCBS for the last 9 years and afraid of going Self Insured

Answer 31

1. Protections in place built in - protection of large (spec) and many (agg)
   ○ Benefit of Self-Funding is gaining control of plan (design, data, and dollars)
   § In FI, you are already sf those large claims - it’s just built into annual premium increases
   § Captives allow you to self-fund within an environment where there is a cushion
   Benefit of large numbers by joining the other members of the company like yourself focused on controlling their spend and being better consumers of health care

Question 32

What does Member Owned mean?

Answer 32

○ Each member is an owner and get stock in the company which provides voting rights, access to financials, and a say in the insurance company as a whole
○ We sell MEMBER OWNED captives at CRI because we believe membership = control
In life - You take better care of something you own vs. something you just use or rent

Question 33

Why do we stress the concept of control

Answer 33

○ Lack of control within the fully insured market as well as self-funding on your own
Taking control leads to more money in your pocket (lower claims and overall total health spend)

Question 34

Berkley

Answer 34

○ Fronting Carrier/Underwriter and primary reinsurer over the captive
○ They look at the loss and claims data to write premium
○ Also work with pre-selected TPA to handle/reimburse large claims
○ Above captive layer (over spec) they are going to cover any losses up to unlimited
○ Above captive later (over agg) they are going to cover losses up to the million dollar retention policy
○ Very highly rated, have one of the highest rating that a carrier can receive (A+ AMS Best) great partner for us for years
15 Size? There is A++ but noone gets that

Question 35

Berkley vs. Zurich and CNA

Answer 35

○ Berkley is a large insurance entity made up of 55 operating companies
§ One of which is Berkley accident and health
§ 55 Independent insurance companies with their own niche (mostly casualty) but across unusual risk (coal miners risk, specialty programs, NFL underwriting) all which make up Berkley which is a publicly traded company made up of Bill Berkley and his son
§ 55 years old as an organization
We don’t utilize them on the casualty side

Question 36

• Why do I need to post collateral

Answer 36

To protect the other members from bad debt! You don’t really know each other, this allows you to play in the sand box together without worrying about each other causing bad debt to the program. Berkley wants to know that this big insurance company we created isn’t going to cause bad debt to them.

1)Protect Members - members agree to share risk but not bad debt. If a member decides to leave when assessed, the collateral they posted would be able to pay that off so other members wouldn’t have to
2) Dollars on hand to pay claims - as an insurance company
3) LOC - Berkley requires us to show them we can cover what we need to cover in the captive layer so we combine the letters of credit/cash from members to create one big LOC to show Berkley

Question 37

Explain Risk and Reward

Answer 37

○ “Our programs are structured where you pay in a dollar, 50 cents goes into a bucket. If you perform well, you get some back. If you have a challenging year and you use up more than the bucket, you could be asked to pay an additional 20% than what was in your bucket. That’s the risk and reward that our program offers”
○ When you join a risk/reward captive you are betting on yourself in terms of how your claims are going to run in the course of the year
○ If claims are lower, you are rewarded with a dividend back from the captive
○ Noone has a crystal ball and claims could be higher than expected. In this case, you can receive an assessment from the captive and have to pay additional funds than allocated
There’s always downside risk but you are betting on the fact that results will come in lower than expected

Question 38

Explain what a pool is

Answer 38

○ A pool is a group of employers that join together to share risk
○ At CRI we have a MSL program with a pooled model where members share risk equally and share profits equally
○ Pooled model - get rewarded (dividend back) based on the performance in the captive layer as a whole
Foundation

Question 39

Why should I be in a risk reward captive as opposed to a pool captive?

Answer 39

Pooled approach is a great solution for some groups looking to offset their risk with a larger block. Not a candidate for pooled bc you’ve run well! And have a smart consulting team. You have Potential for great dividends especially if you do the high performance things (transcend)

	§ All of the loss funds go into a large pot that everyone shares
	§ If theres 13M in claims, everyones paying those 
	§ If loss funds arent enough to cover total claims, then theres a cash call to cover those 
	§ Everyone shares risk and everyone shares reward
	§ If you are running great, you are propping up the captive 
	§ UW as a block - if running high, everyones getting an increase

Question 40

How many members with PH have before enough is enough

Answer 40

○ It all depends on the BOD because all of our captives are member owned so those decisions are up to them
○ Tell me how much profitable growth your company can handle? There should be no such thing as too much
○ We’ve never cut a captive off from growing (some have 400+) but at some point in time we recognize that members feel angst with how large company is getting so we can start smaller organizations
§ Start smaller programs from time to time but don’t want to stop a program from growing

Question 41

Captive Resources 4 medical stop loss captives and what type of business in each

Answer 41

○ 4 total - 3 risk reward and 1 pool
○ Risk Reward - get rewarded for good performance as an organization as well as the captive’s performance (through dividends)
§ Partner health - tailored toward groups currently fully insured
§ WellHealth - tailored toward groups that are already self-insured
§ Transcend - tailored toward both fi/sf but looking to take a more aggressive approach when they join the captive - utilizing RBP, independent PBMs
○ Pooled model - get rewarded (dividend back) based on the performance in the captive layer as a whole
Foundation

Question 42

Tell me about Innovu

Answer 42

○ Data analytics platform available for WellHealth
§ Members use the data to understand what’s going on in the group and better target cost containment measures
§ Purchasing agreement with Berkley where each member contributes half of the fees and Berkley covers the other half
CRI can aggregate data for the entire captive to talk about areas of concern and model future services related to the hot points

Question 43

WELCOA - falls under HRM

Answer 43

○ Wellness Council of America (casualty its national safety council)
○ Wellness website that our members can access to help foster an environment and workplace culture around wellness - step program for employees or other wellness solutions
○ Sister organization to the national safety council - they provide many training modules for a HR contact where the business can see a certain path toward designations and ideas related to keeping employees healthy
“training vehicle” for HR Managers related to Health and Wellness - membership based (CRI pays for this for all of our MSL captives)

Question 44

What is the minimum Premium in our captives?

Answer 44

○ There is really no minimum - its all based on having the right number of employees
§ There has to be some meat on the bone….. A 50 ee group that wants a 250k spec, the premium will be next to nothing ($37,000 premium and 6k would go to captive and the rest to reinsurance) - need dollars to flow through the captive so we would go to them and ask them to take a lower deductible
§ 20k CRI fee - doesn’t leave much for others and makes our number stick out quite a bit
we like it to be 150k to keep dollars in the lost fund)

Question 45

Explain the stock purchase in our MSL Captives? Why 2 diff shares?

Answer 45

○ Part of our financial requirements is purchase of 2 shares of stock for $20,000 and if you ever decide to leave the captive you would get that money back
§ Common share gives voting rights in the captive (or a seat at the table in the BOD meetings)
□ $100 - Rest goes to preferred
□ Allows dividends to be distributed but would have to be equal
Preferred Share - allows for dividends to flow back to you under the risk and reward model, rewarding companies that perform well (our preference is that dividends are only given to those that have earned it)

○ Pooled captive - Dividends distributed based on loss fund size (for example if the captive returns 4% of the loss fund, that would be 4% of every members loss fund  Foundations distribution - someone needs to ask Kevin?

Question 46

Who runs the Captive?

Answer 46

○ The Members! Each member appoints a person to sit on the BOD, and be a Director within the Captive

Question 47

Executive Committee Structure

Answer 47

Together, The officers and Committee chairs/Vice chairs make up the Executive Committee of the captive
○ Like a company, there are Presidents, VPs, Secretary, Treasurer (OFFICERS)
§ Our captives also have Officers (sometimes treasurers)
§ Voted into these positions
§ Term is 2 years and serve at least 2 terms
○ Finance Committee
§ Chairs/Vice Chairs that Oversee (come from Directors and are appointed - not voted, board just appoints) - generally 1/3 of members
○ Health Management Committee
§ Chairs/Vice Chairs that Oversee (come from Directors and are appointed - not voted, board just appoints) - generally 1/3 of members
○ Membership Development Committee
§ Chairs/Vice Chairs that Oversee (come from Directors and are appointed - not voted, board just appoints) - generally 1/3 of members
WellHealth has Ad-Hoc committees with defined responsibilities

Question 48

What is a laser

Answer 48

○ Stop loss industry practice of setting a higher specific deductible on a plan member who is either known to or expected to have high claims
○ For example, choose a 50k specific deductible but there is a member who is known to have 80k of claims that year because of a drug they have to take. UW would set a laser at 80k for that member so instead of the employer having to pay the first 50k for that person, you pay the first 80k
○ Best way to describe is just a monetary transfer you are paying that additional 30k for that individual instead of that claim amount being reflected in a higher premium amount at renewal (with the chance that individual might not even hit it)
Asks employers to take on the risk (might not even happen) instead of them charging you for the risk in the premium

Question 49

What is a Plan Document

Answer 49

Outlines what the ER is providing to the EE in terms of their healthcare coverage
(An insurance contract just outlines what the insurer will cover or not cover of the employees health care coverage)

Outlines the plan details - master description of benfits under which the Ers health plan is administered
○ Comes from the TPA
Opportunity that the employer can script their own coverage within the laws. The Employer works with the Broker and TPA as the off the shelf plan doc and make tweaks based on the benefits they want to offer to their employees

Question 50

3 Sources of funding the loss

Answer 50

○ Member loss fund
○ Assessment
Risk sharing between other members on a pro-rata basis

Question 51

Why is an assessment a good thing?

Answer 51

○ The additional layer of funding protects member to member obligations from additional risk sharing
○ And protects claims from hitting the stop loss carrier
○ They arent going to dip their hand into my pocket until they pay a little pain
§ Casualty they are allowed to pay quarterly over three years but in msl they need to be paid all at once (30-60 days)
Paid quarterly in casualty bc often dollars are in reserve and haven’t left tpa

Question 52

3 Step Process (Each 3 steps have multiple steps within them):

Answer 52

1. Education
   
   2. Game planning (conference call of understanding)
   3. Proposal
      These 3 steps need to be completed to be moved toward success - our goal is to finesse broker partners and get into the end zone together

Question 53

What needs to happen before coverage is bound

Answer 53

• Capital needs to be in Kensington hands BEFORE coverage is bound
  Collateral needs to be posted 30 days from effective date

Question 54

Why should I or should I not take a laser

Answer 54

• Currently, you have no cap on what your renewal or laser could be
  
  • Chance those might not hit
  • Programs to help mitigate costs, still way better off than in FI world
    On the flip - within a captive that’s risk/reward, taking a premium increase for the risk isnt a bad idea because if it doesn’t happen, more $ was paid into the loss fund, and that’s potential to earn back in the form of

Question 55

How much risk sharing is involved?

Answer 55

No year is it going to be exact, but there will be a little bit each year
* PH ~10% of premium (you could expect it be about 8% but it can vary)
§ some years might be 8, some might be 12 - it will vary based on individual years results - average is about__
§ (let’s say it was 10% of the premium, we’d take out 30 grand of your 300k premium which is a drop in the bucket compared to FI)

* WH ~8% of premium on avg. WellHealth has a 50% max assessment before risk sharing, PH is at a 20% before risk sharing, that extra 30% are dollars that in PH would go to risk sharing where in WH would go to the individual assessment

Question 56

Why don’t these comparisons talk about Collateral and Capitalization

Answer 56

This is just a way to look at premium and estimated costs – collateral and capital are a cash outlay, sits as an asset on balance sheet and not included in these comparisons. Side investment consider when joining a captive (broker tends to be more worried than the insured – listen for the types of accounts coming into these programs, they are usually doing pretty well financially and a little bit of cash outlay to join the program that will long term save them a bunch of money and give all these benefits is typically a non issue)

Question 57

What if I cant attend how to I vote?

Answer 57

• At our Board Mtg we have to have a quorum for the mtg to count. That quorum is 50% + 1 of the directors at our BOD mtg
  § To pass a motion, you have to have 50% + 1 of total BOD
  □ So for any motion to pass at this mtg, everyone in the room would have to vote in favor of what is discussed (otherwise it wouldn’t pass as a motion)
  □ BECAUSE of this, need to have proxys to have folks votes count even though they arent there
  □ App called simply voting - if they wont be there, they will fill in who their proxy is going to go towards and at the beginning of the shareholder and BOD mtg, kensington reads off who has X amount of votes in addition to their own
  □ Many will give their proxy to the chairman of the mtg (or the president)
  □ Need to pick a proxy that is like minded because their vote will count as 2 - cant just pass your vote along (because that would be considered doing business onshore)
  Why cant we sit in and listen via zoom? That also counts as doing business onshore if they are voting while sitting in the US

Question 58

Contract terms/Long and Short Contract

Answer 58

§ If you write on 2/1, write a 12/15
§ If you write on 3/1, write an 11/15
§ If you write a 1/1, write a 13/16
§ When you do a proposal for a long or short contract, you are always showing a normal 12 month contract because that is ultimately what is being compared to the incumbent
§ When going into self insured for the first time, the 12/15 gives run out if things don’t work out. Also, a 12/12 is technically an immature contract - we would get them to a mature contract at renewal time. Common for members to go with a 12/15 up front so that they aren’t hit with the increased renewal cost of moving to the mature contract come renewal time but decision is up to you to strategize around
* OE doesn’t change - premium small amount of total costs when SF, hasn’t been an issue in past
§ Well health has higher prices for the longer contracts and slightly discounted rates for shorter contract (still getting more on a short even with discounted rates because also not lowering the spec deductible either. For 12 months if a company has 120k spec, if you go to 9 months, spec is still 120k)
PH holds the same regardless of short or long (this is because we don’t have data anyway so doesn’t make a whole lot of sense)

Question 59

What cost containment solutions can I implement

Answer 59

• Wellness/WELCOA membership
  
  • Independent Rx advocators (Sharks Programs)
  • International sourcing/manufacturers assistance programs
    § Medical Tourism - going to another country for care - employer writes into plan language that they will reimburse for care outside of country (when they normally wouldn’t) and put the stipulations
    § Domestic - go to another state for a surgery with a +1
    § International - a lot of experimental/cancer type care in Mexico for instance (stop loss generally doesn’t allow for this but if its going to save employer money and below spec, it can be written in)
    § *carrot is they get it paid at 100% as an ee
  • Direct Primary Care
  • Bill Audit/Out of network negotiation/claim repricing (claim cost containment) - nurse case management
  • Diabetes Management
    Telehealth
    RBP
    Enrollment Audits
    Onsite Clinics

Question 60

Reference Based Pricing

Answer 60

(this is a cost saving measure) - DIRECT CONTRACTING -
* ANY OF OUR CAPTIVES WILL WORK WITH RBP BUT IF ALREADY DOING IT - TRANDCEND BC DATA RESULTS ARE ALREADY BAKED IN (Can be significant discounts in UW process if they do)
§ RBP is an aggressive strategy to contain costs - some love it some don’t - convo for another time
§ Negotiated rates are pre-set : Anthem or Aetna or UHC might have a certain percentage that they agree to with a provider. With RBP that is on an individual bases and there is a team behind that that does all the adjudication and contracting
§ Every claim that comes in has a set of eyes on it that determines what % of medicare they want to pay for that claim which is typically much lower than the main carriers
§ In some cases, it can be 200 or 300% of medicare and STILL could be significantly lower than what any PPO discount might be
§ Example: In GA, there is a hospital network where the contracted rate for care there is about 400% for the major carriers. A lot of brokers have turned to RBP which gets them to 200-250% of medicare which saves about 150% relative to that
§ PITFALLS - potential for a balanced bill coming to employee, they spend a lot of their day making calls with HR and disruption within business
□ Brokers tend to bring RBP to clients that are in communities that they already know that the major health networks are going to accept OR they know to tell certain businesses to stay away from certain hospital groups that won’t ever except it and will always balance bill
□ Sometimes hospital networks may not agree with the RBP reimbursement model. If this happens, networks can require members to pay up front dollars before that comes into play which causes disruption because they are used to not paying before service. Also potential that the claim isn’t even paid at all - costs end up falling on the employee themselves instead of the healthcare plan

Question 61

What jurisdiction over Cayman Islands?

Answer 61

Cayman islands are a British Territory - self-governing under UK law

Question 62

What data do I have when I am FI?

Answer 62

• If you are getting claims data, probably premiums vs. claims and maybe a large loss report (doesn’t show diagnosis info)

Question 63

Why would we do business with foreign corporation?

Answer 63

• Stop loss policy coming from Berkley, US corporation
  Captive is a financing strategy behind that policy (financial component behind the scenes)

Question 64

Where are dollars held?

Answer 64

• Everything is paid with CAPTIVE dollars until Berkleys portion kicks in so there is some back and forth between Berkley and Kensington to make sure cash flow is there
• Credit suites and scotia bank (in cayman)
• Scotia acts as a checking account for the program (dollars coming and going more frequently)
• Each month - we get the cession statement and we start seeing claims being paid,
• Berkley has a the monthly premium from the members and Berkley takes a portion of the 50% ceded premium (loss fund) and they top off their own loss fund in the US before the rest is sent to Cayman. If there is a month where there isn’t enough to cover the loss fund dollars that went out of the lost fund, then the cession calls for Kensington to send dollars back to Berkley for fulfillment of loss fund
• First 3-4 months after the loss fund is held by Berkley, then most get ceded and as claims start occurring during the policy period, many of those dollars get held and just reimbursed into their own fund. This is because at no point does Berkley want to use their own money until they have to with their portion

Question 65

Who governs self funded plans

Answer 65

• ERISA - governed at the federal level
  Fully insured is governed at the state level

Question 66

Rx rebates

Answer 66

pharmaceutical companies give discounts to pbms to steer folks to their products. Transparent PBMs will share those with the employer as opposed to pocketing them and charging fee from employer to get cost savings

Question 67

what is an aggregating specific deductible

Answer 67

not on every single person but kind of like a $75,000 line of credit. You can tap into it whenever you want. If you have one person that goes over or 18 people go over the spec, this would help grab their needs. Once its gone its gone, you’re not paying for every person or re-up it, it’s just done for the year
* Increases your responsibility by 75k
* Get that exact reduction off of your fixed cost (premium) - reduces premium by 75k
* Only paying it when you need it and only up to that amount as opposed to it automatically being included in your premium
* Take on more risk off of the carrier and get rewarded with lower fixed cost

Question 68

Monthly Accommodation

Answer 68

Claims have peaks + valleys
This allows them to chop the peaks (most similar to Level Funded)
* Berkley “The monthly accommodation that was mentioned is specific to aggregate claims. LJD does not have monthly aggregate accommodation however if they are interested in adding it mid-year, I can reach out to underwriting to verify if that is possible. It will cause an increase in to their monthly stop loss premiums.”

Question 69

Spec Advance

Answer 69

“Multiple Spec Claims”
Many large spec claims - allows carrior to help finance them $2.06 PEPM
* Gives more perception of protection
* “sleeper insurance” allows you to sleep at night
* Berkley calls this Simultaneous Funding
Simultaneous funding provides cash-flow assistance when groups have difficulty paying catastrophic expenses. This value-added service allows the administrator to adjudicate catastrophic expenses in excess of the specific deductible while requesting carrier to “simultaneously” process a reimbursement for the excess expenses.