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Self Insured Removal of High Risk Claimants


Guest budman

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A broker contacted our self insured group about implementing predictive modeling to identify potential future high cost claimants. We have considered this for disease management but his approach is also removing these future high risk claimants from the plan and providing them with alternative coverage. The broker would be paid a percentage of the "savings" and we would benefit with lower reinsurance premiums and claims costs. The trick is that before he would disclose all details of this we would have to sign a confidentiality agreement of which we declined. Evidently, it would involve replacing the participant's group coverage with alternative coverage. He alluded the other coverage may be a type of high risk MERP and that the participant would actually have better coverage than the group plan so they would have no reason to refuse. We certainly thought this would be discriminatory but another group in our state that he called on that we are familiar with is looking further in to this and their attorney said that it passes all DOL and state requirements for not being discriminatory. Of course they signed the confidentiality agreement and are reluctant to share the details with us. Has anyone heard of such an arrangement that would be advantageous to a self insured plan and not discriminatory? Frankly, we don't want to go near this one but are wondering if someone has tapped in to a new cost containment strategy.

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So, the sales rep proposes that you separate your group into a high and low risk group with separate coverages. The high risk group gets better coverage, the low risk group presumably gets equivalent coverage and yet your overall costs decline? Nice trick, I'd like to know how it's done too.

As far as being non-discriminatory, it may be ERISA non-discriminatory by design but who is likely to end up in the high risk group? Older workers, overweight workers, black workers, anyone with a statistically larger chance of becoming a claimant. ERISA may not be your only worry, the bad PR could be a nightmare.

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Lots of bells ringing on this one. I'd be concerned about the confidentiality agreement. That indicates a strained interpretation of the rules. The hearsay (the attorney for the other potential client that can't give you the details) about it's being ok under ERISA and the Code is suspicious. Businesses often will do something aggressive if they think other businesses are doing it - sales people know this and exploit it. Finally, the payment scheme would bother me - it encourages the agent to put together the most aggressive scheme - but ultimately your company would be on the hook it it didn't work in the end.

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Nothing new, it has been around for years but just starting to get used for a few reasons. We have been doing it when useful since 2000.

Such Predictive Modeling is available from many sources and should be even available from your current claims administrator. If not any of their competitors should be able to do it. The problem is that most might not even know that they have the capability. Other than that, there are a few other providers available.

As far as I know very few would require any sort of confidentiality or non-compete agreement (which is what I think you are really being asked to sign).

The biggest potential problems might be employee reluctance, availability of required coverage and ADA violations. What would you be advised to do if an employee who is currenly under care for major cancer (or any other high cost, disease) refuses to change?

Additionally since this is self funded, what will the stop loss insurer say? You better get that answer before you even start thinking aboutlooking at this program.

I am curious as to why this Broker thinks that it might be necessary to have these "high cost" employees in a separate plan when you are self funded. I supect that your Broker either does not quite understand the issues and is making it more difficult than necessary. But then again, I do not know what his provider told him or how they think it needs to be done.

Think about it, If you implemented a Disease Management program or a Center of Excellence provider program, you would be focusing thes on exactly those same "high cost" employees, wouldn't you? You would have identified them in a very similar manner to Predictive Modeling, wouldn't you? To do any of these you would not need to put them in a "separate" plan or much else,, would you?

I am also suspicious of what you are being told about DoL and state non-discrimination. That person might just have been looking in the wrong direction. What about the IRS with sections 4980, 105 and 125 etc? Are they considering HIPAA as being DoL?

Lots of questions to be asked. But you might get simpler easier answers using other providers of this service who might also have more answers and more experience. I noticed that you only contacted 1 other prospective client, Is that all that this company has or is that all that this Broker has? You might want to use what the company has instead of what the broker has as referrals. Of course there are some providers who give no references or referrals for a number of valid reasons.

George D. Burns

Cost Reduction Strategies

Burns and Associates, Inc

www.costreductionstrategies.com(under construction)

www.employeebenefitsstrategies.com(under construction)

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I agree with GBurns, this is nothing new, in fact many self-funded or experience-rated groups used this strategy with HMO's as the dumping ground for high-risk. The predictive model is relatively new, but should be fairly dependable. I would not be so concerned about signing a confidentiality agreement if that agreement allows you to see what the details of the program are. Good luck.

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Let me clarify that we are a small TPA. The broker called on one of our groups directly and got them hyped up about this supposedly new and groundbreaking concept before we were brought in to the picture due to them signing the confidentiality agreement. The group had the broker meet with us and he wanted us to turn over the claims, pharmacy and eligibility data and we refused without knowing the details and cited that it is our fiduciary duty to only do this in the best interest of the client. He has an arrangement with a very large TPA that also performs predictive modeling and disease management. His interest is not in the DM but removing the potential large cases from the stop loss coverage to save the group in premiums and claims. We have a good relationship with our group and they want us to figure out this concept so we can handle it for them. We cannot see how this would not be discriminatory and create ADA issues, etc. We are more interested in combining predictive modeling with disease management. Gary Burns, you stated that this concept has been around and you have used it yet you do understand the negative and potentially harmful issues this could cause. Can you explain how you have used it?

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It's George D. Burns.

As also pointed out by leevena, it really is not new.

I have used it to determine the potential for a DM, C of E, Carve-out Rx, checking employee utilization, provider effectiveness, provider competence and other things. Primarily I use it for determining cost reduction strategies. Using PM you can see where the money is being spent which is the first step in trying to reduce the costs of providing employee health benefits, isn't it?

That in a nutshell is what I use it for, without giving away some "secrets" of my strategies.

George D. Burns

Cost Reduction Strategies

Burns and Associates, Inc

www.costreductionstrategies.com(under construction)

www.employeebenefitsstrategies.com(under construction)

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Sorry George. I misread you and thought you meant that you used a method for removing high claimants from the plan. We have reviewed several companies that perform PM services and will be implementing that but not for identifying who to remove from the plan as a cost savings measure. I appreciate all the responses but am still baffled as to the broker's how to. Has anyone heard of a "high risk MERP"?

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Yes, I have heard it used but that was always by persons who knew very little about employee health benefits. Some were promoting such things as a Coordination of Benefits program used to reduce claims much in the same manner that this Broker is doing the PM. That program had much potential but never got anyhwere as far as I know because of the lack of knowledge about health plans. The term health plans includes MERPS.

A "high risk MERP" has meant a MERP that covers only high risk (cost) individuals. I have yet to see 1 that passes 105(h) and 125 non-discrimination etc. In fact, I have yet to see 1 that was eventually implemented, anyway. There were other ways of getting the same result or better.

It seems that products sell better if there is an acronym or a buzzword. Plus it is easier to appear exclusive if you use terms that seem that way.

The idea should not be to remove "high cost" persons, but to arrange more economical and effective care. These can be done within the confines of what you already have with some tweaking and supplementing.

George D. Burns

Cost Reduction Strategies

Burns and Associates, Inc

www.costreductionstrategies.com(under construction)

www.employeebenefitsstrategies.com(under construction)

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  • 6 months later...

Budman,

This sounds suspiciously like something being marketed in western Pennsylvania. The high risk participants are put into a guaranteed issue Highmark BC/BS product and the MERP reimburses for any deductibles, copays, etc so that the employee has coverage which is "better" than the underlying plan. If this sounds familiar I'd be interested in hearing from you.

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  • 2 weeks later...

I too am somewhat familiar with the MERP. It depends on the state and the state risk pool requirements. Get 5% off the plan that account for 50% of the costs. It's pretty simple. If you know you have a congestive heart failure and some potentially high cost diabetics on the health plan and you can put them into a state risk pool, your claims will go way down. If you have a reinsurance partner that understands and respects the MERP, then you should get a 10-20% reduction on the stop loss premiums. The concept is extremely powerful and checks out. The key component is determining what state you are in. The predictive modeling is very underrated and essential to the success of the MERP. Securing a health plan for a "high risk" individual could be difficult.

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budman:

I think we should explore a bit further the MERP concept.

Unfortunately, I do not have expertise in this area.

The general problem of discrimination that we are discusing here, is due mainly to the plan's structure: it is a "defined benefits" health plan.

Typically, in this arrangement, premiums cannot be higher for individuals due to health factors.

Premiums are paid monthly. There is no cash build up, obviously. There is no build up, period.

Contrast this plan design with a "defined contributions" plan, in which coverage builds monthly.

Benefits are determined, in proportion to premiums paid, and claims made.

Just as a defined contribution plan balance would be lower, if withdrawals are made; so, too, would the balance in a "defined contribution" health plan be lower if claims are made.

Don Levit

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