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Timothy L.

Cook, Strategic Business Development, Ternian Insurance Group LLC


Ternian Insurance Group, LLC, 7310 N 16th St, Ste 100, Phoenix, Arizona 85020, 602.216.0006
www.ternian.com
Stop loss requirements
and the pursuit of self-
funding. A fact-based
analysis.
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An unprecedented 25% participation requirement for stop loss within Ternians
plans will allow employers to offer this coverage to all classes of eligible employees.
Self-funded benets are emerging as an ideal approach for employers looking to offer
an affordable minimum essential value plan to eligible workers. In fact, a recent survey
of health insurance executives reveals that 82 percent have experienced a growing
level of interest among employers for self-funded group insurance.
1
Self-funded
benets offer a variety of advantages for mid-size and large employers, including:
Unlike fully-insured plans, these plans are not tied to community rating and are
not subject to state insurance laws or many ACA requirements such as the health
insurance industry fee. As a result of these requirements, many health insurance
carriers have predicted that premiums for fully-insured plans may increase in the
double digits for 2015.
Self-funded benefts are not subject to reviews by HHS for premium increases.
These plans can be customized to meet the needs of employees and an
employers budget.
The challenge for employers with lower-wage or hourly workers
Non-discrimination testing does require that the same ACA-compliant plan be offered
to all levels and classes of eligible employees, regardless of whether the benets are
self-funded or fully insured. This is a challenge for many employers who have
traditionally offered major medical coverage as a carve-out available only to managers
and home-ofce employees. Thats because low participation among hourly workers
(such as those employed in the retail, service and hospitality industries) will mean that
employers cannot meet the strict participation requirements of stop loss carriers.
Stop loss is a critical element of self-funded coverage, especially in light of the ACAs
elimination of certain benet restrictions such as lifetime maximums, which can
drive a large volume of high-cost, catastrophic claims. However, employers with low
participation rates (below 75 percent) are not generally considered candidates
for stop loss coverage. Some stop loss insurers have slightly higher or slightly lower
participation thresholds, but on average, anything below 80 percent will typically
not receive a bindable stop loss quote.
The self-funding dilemma: Traditional stop loss
participation requirements will prevent many
employers from pursuing self-funding as an
affordable solution for ACA-compliance.
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Employers with low
participation rates
(below 75 percent)
are not generally
considered
candidates for
stop loss coverage
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Ternians self-
funded plan option
requires as little as
25% participation
for stop loss
coverage to be
bindable, making
this is an extremely
affordable solution
for employers.
This level of participation will be impossible for many employers to meet, especially
those in industries mentioned above. Thats because younger, lower wage workers
have a signicant price sensitivity to benets, even when they are offered with a
sizable employer contribution. A recent research study demonstrated that among
full-time eligible employees with base pay between $15,000 and $20,000, only
37% elected health coverage.
2
In the small group who did elect health benets,
the employee contribution to premiums averaged just 5.7% of their total pay.
Age may also have an impact on participation rates. According to a recent Wall Street
Journal article, in 2014, young workers in the U.S. signed up for employer-sponsored
health plans at a lower rate than last year, in spite of the individual mandate.
THE SOLUTION: Ternians self-funding approach
allows for as little as 25% participation
Ternian has partnered with a forward-thinking stop loss carrier that is willing to adapt
its participation requirements to meet the changing needs of employers in light of the
ACA. Our self-funded plan option requires as little as 25% participation for stop loss
coverage to be bindable, making this is an extremely affordable solution for employers.
In addition, our solution gives full credit for coverage elsewhere waivers where an
employee has health insurance through a spouse or government exchangemeaning
that these individuals wont count toward participation rates. Census bureau studies
suggest that this number will be approximately 33%
5
of the eligible employees. In
addition, since only 70% of employees need to be offered coverage in 2015 according
to new rules issued for the employer mandate, the total number of enrollees can be
reduced even further.
6
The following chart illustrates the cost savings that can be achieved by employers
with lower participation through Ternians solution:
Total employees 1,500
Less part time employees and measurement
period employees (50%) -750
Less waivers for coverage elsewhere
(33% of new eligible employees)** -145
Full time eligible employees 605
Employees that must be offered coverage
(70% of full time eligible employees) * 424
Carrier required enrollment to meet
a 25% participation requirement 106
Less 90 employees currently enrolled
in a major medical carve out plan -90
Net new enrollees required 16
Estimated increase in monthly employer
cost at a $250 contribution level $3,969
If desired, Ternians self-funded plan can be aggressively priced with the lowest level
of ACA-compliant benets. The employer can then offer class dened supplemental
benets that dont coordinate with the major medical for higher-paid employees while
still avoiding discrimination issues.
Unless employers are willing to contribute to major medical plan premiums to
the extent that the employees costs reaches nearly zero, a traditional self-funded
approach will not be an option for many organizations. However, Ternians plans
will put self-funded benets within reach for many employers, regardless of the
age or income levels of their eligible employees.
To learn more about this solution, contact us today
at 602-216-0006.
1. Munich Health Survey. February, 2014. http://www.businesswire.com/news/home/20130415005132/en/
Health-Insurers-Anticipate-Increase-Self-Funding-U.S.-Employers#.U2JZwKV220u
2. ADP. How Income Impacts Employee Health Benefts Participation White Paper. https://www.adp.com/media/
press-releases/2013-press-releases/adp-research-institute-study-employee-income-is-a-determining-
factor-in-benets-participation.aspx
3. Francis, Theo. Wall Street Journal. Young Workers Fail to Flock to Employer Health Plans: Take-Up Rates
Among Those Under 30 Show Unexpected Decline. April 3, 2014. http://online.wsj.com/news/articles/
SB10001424052702303847804579479181342342704
4. Albert, LaRea. Stay the course. Benefts Pro. http://m.beneftspro.com/2013/08/05/stay-the-course
5. Hubert Janicki , US Census Bureau. Employer-based Health Insurance 2010. Issued February 2013.
https://www.census.gov/prod/2013pubs/p70-134.pdf
6. www.irs.gov/uac/Newsroom/Questions-and-Answers-on-Employer-Shared-Responsibility-Provisions-
Under-the-Affordable-Care-Act
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