Merger of two health plans

[Guest JD698]

Two multiemployer Taft Hartley welfare funds are considering merging (more like the smaller one is merging into the larger one.) The Funds are administered by the same group. Are there any issues to be concerned with? What, must be done from a procedural standpoint to effecutate this? Due diligence issues? Forms to be completed?

Thank you.

[leevena]

Two multiemployer Taft Hartley welfare funds are considering merging (more like the smaller one is merging into the larger one.) The Funds are administered by the same group. Are there any issues to be concerned with? What, must be done from a procedural standpoint to effecutate this? Due diligence issues? Forms to be completed?

Thank you.

Could you clarify some more please? Are you closing one plan and placing the participants in the other plan? Are you closing both and creating a new plan? Are you trying to merge the two into one plan? Any additional information would be great.

[Guest JD698]

Two multiemployer Taft Hartley welfare funds are considering merging (more like the smaller one is merging into the larger one.) The Funds are administered by the same group. Are there any issues to be concerned with? What, must be done from a procedural standpoint to effecutate this? Due diligence issues? Forms to be completed?

Thank you.

Could you clarify some more please? Are you closing one plan and placing the participants in the other plan? Are you closing both and creating a new plan? Are you trying to merge the two into one plan? Any additional information would be great.

The larger plan will remain as is but will take in the participants of the smaller plan. The smaller plan is part of the same union but in a different geographic location.

Hope that helps

[leevena]

There are many issues that need to be addressed, and I am sure that I am not going to touch all of them, but I'll try my best.

1. Communication of the new benefits to the smaller group losing their benefit. 2. Coordinate the claim payment for ongoing claims of the smaller group. 3. Loading the smaller group enrollment/eligibility information into the larger group systems. 4. If you have Stop Loss, notify them, they may or maynot make changes. 5. Notify any outside vendors (PBM, etc) that you may be working with. 6. Coordinate any COBRA participants. 7. Coordinate any participants not actively at work. 8. Review plan documents for the larger group to identify any issues that may arise, and make changes if needed. 9. What about the provider networks from the smaller group, can they be accepted into the new larger plan? 10. Need to make reserve calculations for the new group. 11. Get the participants from the smaller group new cards, booklets, etc.

Like I said, I don't think this is an exhaustive list, but it should get you started.

[Guest JD698]

There are many issues that need to be addressed, and I am sure that I am not going to touch all of them, but I'll try my best.

1. Communication of the new benefits to the smaller group losing their benefit. 2. Coordinate the claim payment for ongoing claims of the smaller group. 3. Loading the smaller group enrollment/eligibility information into the larger group systems. 4. If you have Stop Loss, notify them, they may or maynot make changes. 5. Notify any outside vendors (PBM, etc) that you may be working with. 6. Coordinate any COBRA participants. 7. Coordinate any participants not actively at work. 8. Review plan documents for the larger group to identify any issues that may arise, and make changes if needed. 9. What about the provider networks from the smaller group, can they be accepted into the new larger plan? 10. Need to make reserve calculations for the new group. 11. Get the participants from the smaller group new cards, booklets, etc.

Like I said, I don't think this is an exhaustive list, but it should get you started.

Thanks Leevena.

That really helps. I found out that one of the smaller funds is not that solid and I believe that would present a problem for the trustees of the large fund.

Are there any forms that must be filed to effectuate the merger? any after it has been completed?

thanks again.

[leevena]

Thats another story, sorry, but I did not even consider that from your earlier posts. I assumed that the due dilligence had been done and that all sides were satisfied.

The analysis should be done from a variety of perspectives. To begin with, are you purchasing everything (lives, administration, staff) or just some part? We know you are looking at purchasing the lives, so let's start there. The lives you are purchasing/merging are really "risks", that need to be evaluated and an expected medical cost calculated. If the group has a higher than average risk the medical costs may be higher than you expected. Best way to determine this is to have an actuary review the risk. Your biggest concern may be the large claims and the potential longer term effects they may have on your costs.

An additional financial issue to consider is the actual block of business you are purchasing and if it will still be there after the sale. I don't know the particular of your fund, but will some of them leave? Let me give you an example. A few years ago I was with a health plan that sold everything (book of business, staff, buildings, etc) to another health plan. We had to calculate what level of membership would be there after the sale. It did drop, about 30%. Needless to say, the purchaser was very upset, but my analysis of membership did include a potential for that level of loss.

You should also pay attention to non-financials, such as administration, buildings, staff, etc. that might be in the deal. The smaller fund may have staff, buildings/rent, computers, software, etc. that might be included in the purchase/merger. Before doing an evaluation of their costs, you should do an evaluation of your own capabilities and determine if you (larger fund) could accomplish the tasks without their resources. Pay particular attention to hidden costs, such as lease agreements, service agreements, employement contracts, beneift contracts, etc.

From the trustee perspective, how does this affect them? Will the small fund request/require a seat, or some kind of influence?

There is much more to consider, but this should get you started. Good luck, Lee