Designed for groups with 5 to 99 enrolling employees, AmeriShare and ATA America offer an alternative approach to funding employee healthcare benefits. Ask us how to show your clients how they may reap the benefits enjoyed by larger employers in a way that makes sense for smaller businesses.
ATA Carrier Update
Jason Powers: I’m Jason Powers, and I am joined by the great Tom Stein from American Trust Administrators. Tom, I don’t mean to embarrass you here, but I consider very few people in this industry to be my mentor, and you are one of those. Welcome to our studio.
Tom Stein: I appreciate it.
Jason Powers: Welcome to our carrier product update series. This is our Q4 kickoff summit, January renewals are around the corner. We try to quote ATA on just about every case we can. I think that it is one of those hidden gem of products that not a lot of agents have heard of, and we look forward to giving them some insight from your perspective.
Tom Stein: I appreciate it. Let’s talk about level funding, self funding, whatever you want to call it. It originally was called self funding and went to level funding, but let’s talk about what it is, what it’s not for. It’s not for above average claims groups. I mean, they have bad experience. You’re not going to save anything, and it’s a waste of your time. It’s not a short- term solution. It shouldn’t be entered into that way. It’s not for financially unstable employers. I mean, if you’re talking to somebody who’s [inaudible] layoffs. Oh, boy. Probably not a good prospect at this time. Whatever you do, don’t terminate our plan or anybody else’s plan off anniversary. As long as you remember that and the prospect still fits, let’s talk about it. Okay.
Jason Powers: Yep. A little bit about ATA?
Tom Stein: ATA was founded in 1972, so we’re 50 years old this year. We do everything for our clients. Underwriting, pay claims, bill/collect issue. We do all of that. We are one of the originators of small group cell funding. We started in the late eighties, at the time when people said you couldn’t do it, and I wish I had 10 bucks for every time somebody told me we couldn’t do it. We’re right here in Kansas city. We operate in about 37 states. Minnesota, California. New England states we don’t play in. Other than that, we’re a player.
Jason Powers: Because you’re an administrator, again, not a manage care company, you’ve got strategic relationships with actual networks?
Tom Stein: Yep. We probably have relationships with about 60 different PPOs. The truth of the matter is, we probably do the majority of our business with five or six, Cigna being the biggest. We use script care and Cigna for RX. We write HSA plans, dual and triple option plans, reference based pricing plans. We do some HRA administration. We act like the insurance company in a fully-insured plan, if you will. We do all that. With medical management primarily being done by Cigna.
Jason Powers: You also do Cobra administration?
Tom Stein: Yeah, we do Cobra administration. It’s built into the plan if you are eligible for Cobra. We do that. We rank in the five to 99 market. To be honest, we’re probably five to 60 lives is our sweet spot. We use medical apps on everybody. I know that sometimes becomes a problem, but you guys use FormFire and we certainly accept FormFire. This gives a smaller employer an opportunity to save from the level funded side, so we’re quite happy with what we’re doing.
Jason Powers: We’re happy with the efforts and the results, I think. On the underwriting side, I think ATA gives us a real good picture of the risk of where a case fits and where it doesn’t fit. I think there’s good, open communication there. This is the challenge in putting together our carrier product updates. There’s no confinement of a product grid with ATA. There really is total customization of [inaudible].
Tom Stein: I’m not sure how many different plan variables we could have, but it’s into the millions when you look at different specs, copay, doctor copay, ER copay, drug plan deductibles, co-insurances. It’s amazing. You and the employer, you have to put it together as an agent. A lot of agents ought to ask the employer, “What do you want your plan to do?” Forgetting cost at first. “You want it to pay for everything? You want them to have some skin in the game? Let’s talk about what we could put together.” We’ve got PPO plans. We do have indemnity still. We haven’t sold one in I don’t know how long. But then you’ve got RBP, reference based pricing plans, and that’s basically an indemnity plan. We’ve got a whole bunch of different options for you.
Jason Powers: Priced on the opposite spectrum of an indemnity plan?
Tom Stein: Yes. Well, the RBP is, by far and away, the least expensive.
Jason Powers: Sure, sure.
Tom Stein: Employers used to do health plans to keep employees. Now, it’s not so much that. They just have to have it to have employees. Excuse me. When you do self-funded plans, you get rid of obviously government mandates, except by ERISA, through ERISA. We don’t pay the health insurance tax. Probably one of the biggest things that you get, at least that we provide, is reporting. Most employers have no idea where their money goes. Sometimes, it’s amazing. When they get a quarterly report, they’re looking at it and going, “My God, are we spending a bajillion dollars on drugs?” They don’t know. Now, can they do much with that? Well, yeah. Change your drug card, that kind of thing. You’ve got some flexibility that you don’t get from fully insurers, and that’s a big piece of it.
Jason Powers: Your reporting cadence, those aggregate reports are kicked out on a monthly basis?
Tom Stein: If you want a monthly, quarterly. Obviously, we do it annually. But as a broker, I would want to at least go into my client once a quarter and say, “Well, let’s just take a quick look, see how you’re doing.” That way if they’re doing poorly, they shouldn’t be too surprised come renewal time. On the other hand, “Wow, man. We’re putting away a lot of money. This is a good thing.” That’s good.
Jason Powers: Sure, sure. Yeah. It helps remove that anxiety over that impending renewal. If it’s running at a 50, 60% loss ratio, that’s a case that probably isn’t going to see any significant movement at renewal. I’ll say, to a ATA’s credit and your underwriting relationships with your carriers on the stop loss side, that’s true. I mean, we see that. Theresa in our office, who handles our renewals, she’s constantly negotiating renewals. Trying to get rate relief. With [00:09:00] ATA renewals, there’s not a lot of need for negotiation because they’re coming out at the right numbers. They’re coming out at where we expect them to be. That’s always been the stability of the program with ATA. Now, in fairness, I started my career with ATA.
Tom Stein: I understand that.
Jason Powers: I have to be honest with the audience here. So, I have a little bit of a soft spot for ATA.
Tom Stein: We’d call it biased, but that’s okay. It’s so funny. It’s been a while since ACA came out. I think we forget some of the other benefits. There’s no community rating. The younger groups get a better deal self funded by far. The older groups, when you get an average age of 50 and over, probably should seriously consider ACA plans. You don’t have the age bands. You don’t have the medical loss ratio. Those are other benefits of self funding or level funding. I use those terms interchangeably.
Jason Powers: Yeah. That’s where I learned it from, you and Richard.
Tom Stein: There you go.
Jason Powers: When we’re talking self-funding, in particularly with the AmeriShare product, we’re talking excess loss coverage to protect employers from the higher risks.
Tom Stein: We offer two kinds of coverage, specific and aggregate coverage. The specific, if you don’t know, protects against one large claim. The aggregate protects against a bunch of smaller claims that would exceed a particular number that we give you. It’s provided by A&A+ carriers, so there’s not any concern there.
Jason Powers: And specific deductible options?
Tom Stein: We’ll hit that in a second here. One of the key pieces on this next slide is, we include prescription drugs. If you do dental self funding, we’ll include that in the specific and aggregate. If you write a 15 life case with… Almost everybody has drug coverage, but if you throw in the dental, it’ll be part of the specific and part of the aggregate. That’s a big piece. Claims are reimbursed simultaneously, so there’s no lag in claim payment. I mean, we draw from the re-insurers accounts and go from there. Excess loss covers the group for considerable claims. Not necessarily severe claims, but just a whole bunch of claims. That’s where we are there on the spec. Excuse me, on the aggregate. If you go to the next slide or two, our specs start at 7500 and go to 50. Quite frankly, we have not very many cases at a 50 000 insurance spec, but a lot of them are 10, 15, $20,000 specs. That limits the employer’s exposure. On the aggregate, same reimbursement. Immediately upon a process claim, we would pay that. It also includes the dental and drug cart.
Jason Powers: Prescription [inaudible].
Tom Stein: One of the things we do in our aggregate is, we have a 5% claim fee. That 5% claim fee is figured into the aggregate numbers. When you get a quote from us, and we’ll go through one at the end, that includes our claim fee. That’s only up to the specific, it’s only up to the aggregate. We don’t continue to charge.
Jason Powers: If they don’t have the claims-
Tom Stein: There’s no claim fee.
Jason Powers: … they don’t pay the fee.
Tom Stein: It’s pretty cheap. We got a monthly accommodation, everybody has that now with level funding. That just means we pay the claims as they come due. On an aggregate basis, if you hit the monthly aggregate, we advance the claim payment. We’re often [inaudible]. As I mentioned earlier, early termination is not a good thing in self-funded plans.
Jason Powers: Sure.
Tom Stein: If you would early terminate a plan, and we’ve already made monthly advances because your claims were high, you’re going to have to repay those. Okay. That’s why you want to terminate at anniversary and clean everything up at one time.
Jason Powers: Sure, sure. Well, that’s why I think you mentioned it on the front end. The group where level funding doesn’t work is groups who are maybe dealing with high turnover, or they’re financially not sound. Maybe they look at a level funded quote and go, “Boy, this looks like a way for us to get through the next three months.” It’s really looking at self-funded plans or level funded plans as a long term solution.
Tom Stein: Yep, absolutely.
Jason Powers: So then, we talked about aggregate. The contracts, that’s the next thing, right? The different levels of contracts. Most level funded products we see, it’s one. It’s a 12/18, it’s a 12/60, it’s a 12/21. We don’t really have the option to change that. You guys have some different ways to structure those.
Tom Stein: Various PPOs. Cigna, for instance, demands that you use a 12/24, but the other PPOs, 12/15s, 12/ [00:16:00] 18s. Again, this goes into all those variables that you could do for your client. 12/24, the reason is Cigna’s PPO contract with their providers gives them one year to file a claim. It seems like an awful long time to file a claim, but okay, we’ve got to live with that. Could you go to the next slide. Various contract types. That’s a 12/15. For the people that have never done self-funding or haven’t done much, the first number is when the claim has to be incurred, the second number is when it must be paid. A 12/15 means you got three months from the end of the contract to get it paid. If not, it becomes your liability, Mr. Employer. Pure and simply.
Jason Powers: Your options vary. 12/24, we see a lot of when we quote Cigna.
Tom Stein: 12/18s, we use. 12/15s aren’t as popular as they used to be. I’m not sure why. Maybe because the competition goes to the 12/24s and 12/18s. 12/21s. It’s all different, yeah.
Jason Powers: Not a lot of premium differential, right? Between that 12/15 and 18, as we used to see.
Tom Stein: No.
Jason Powers: I think prompt pay laws, and some of those other things, are starting to… I think the only thing that triggers a 12/24 for me is if Cigna is the PPO and we’ve got to go that route. But otherwise, I think 12/18s is generally probably enough.
Tom Stein: Boy, it would be strange today not to be, I think. The next slide shows some funding options, and this is where I think we’re a little different than most players.
Jason Powers: Yeah, definitely.
Tom Stein: Everybody talks about level funding, and most of our business is level funded. They pay the same thing all year long, as long as the census stays the same, but we also allow minimum funding. Now, generally that’s more of a renewal tactic than it is upfront, but minimum funded says, “You pay the fixed cost. We will send you a bill every two weeks. When we receive the money, we’ll release the claims we’ve got.” The only problem there being that the employer has to understand aggregate accounting, because even though he only paid a hundred dollars in claims for the first three months, his attachment point was 2000. He’s going to have to fund that $6,000 if he gets it.
But at renewal, a lot of people go to the minimum funding or go to, call it, partial funding. We have a fixed cost and an aggregate cost. Put those together, you get your total cost every month. But if you’ve got money left from your account the year before… Geez, I’ll use some of that, and I’ll send in a little bit extra every month over and above my fixed costs. So, people get a rate increase. Actually, if they’ve got enough money, they have a rate decrease, and we can change that upon written requests.
Jason Powers: I think our caution to brokers out there when looking at that is, just be mindful of your run out. You don’t want to spend all of your surplus before you’ve at least seen a few months of run out claims. That goes back to that, three months is probably enough. Six months is definitely enough. But, just know that you still have liabilities during that runout period. The surplus has liabilities during that run out period. Speaking of surplus. Right on queue, right?
Tom Stein: Yeah. Roll over the cover onto next year’s claims. You can add benefits, but you got to be careful. I have never heard of the IRS or the DOL smacking somebody upside the head for using those moneys for something else. That may just be ignorance of their rulings, but you’re supposed to use it for other ERISA approved benefits. If you don’t have dental, you could do dental. LTC, life, disability, vacations. Christmas party, as long as you invite everybody. At termination, return to the employer, but I know a lot of people just send me my money. We don’t practice accounting and we don’t practice law, although we may say to them, “You might want to talk to your attorney and your accountant about taking this back, but you can have it.” I think you were there when we had that huge case up in Wisconsin.
Jason Powers: Oh, my goodness.
Tom Stein: Had three quarters of a million dollars in their account for a 20 life case. I mean, they just never had any claims. They were with us for so long. But when the guy finally called, he said, “I want my money.” I said, “Well, you said that last year. You just got to send me a letter saying that you want your money back.” I said, “But why has it changed this year?” He said, “I’m retiring. That’s my new vacation home.” I’m going, “Oh, that’s the plan’s money, but okay. Talk to your accountant and your attorney, please.”
Jason Powers: If you give every employee a key to the house, does that count?
Tom Stein: It could be. No, I don’t think It’d follow under ERISA. Looking at our proposal. As I mentioned earlier, it talks about funding, fixed costs, and that includes everything. It’s ragu, if you will. It’s in there. The excess loss coverage. Agent comp, which most of them like to be paid. Our fees, PPO fees, medical management. All that stuff. The other one is the maximum aggregate deductible. How much money are you going to put into your claims account? That does include that 5% claim fee. If you take a look at the proposal, the next page, you’ll see how it’s broken out. The top line is fixed costs. That’s that ragu. The second one is your claim costs. Your third one’s a total. You pay that, and you’re in good shape. Now, this one particularly has a spec and an ag. A $10,000 spec. If you had one claim that hit a million dollars and no other claims, you’d get back what? 30 some thousand dollars. If that person was still on the plan and still had claims, you’d probably also get a pretty big renewal.
Jason Powers: But if you have 37,000 in surplus, you’ll buy that fully-insured plan.
Tom Stein: Yeah. You have that. That’s the spec and the ag. We also offer aggregate only. Once you do there, it is more money into the fixed, less money into the claims account. But overall, it’s eight, nine percent less expensive, so if you’re looking purely for rate, the ISL, or ag only product. If you’re really looking for low rate, then you look for the RBP.
Jason Powers: Yeah. I think we quote that ISL probably more times than not on the stuff under 10, where it’s really tough to get to maybe that minimum ag. I know there’s some certain rules with stop-loss carriers about having enough. You don’t want to put too much pressure on the ag by having a higher spec. By eliminating the spec and just going ag only with that integrated product, it helps with the pricing. It makes it an easier [inaudible].
Tom Stein: The small employer?
Jason Powers: They don’t know the difference between the two. Excess loss coverages. I think that’s also a launch. If you start with ISL, then you move into a spec and ag, and they build a surplus, then you move into the minimum fund.
Tom Stein: And if they grow. There’s all sorts of stuff that they can look at and change. Because year to year, you go from ISL to spec and ag, whatever, at renewal. We don’t have any rules against that.
Jason Powers: Yeah. Tom, I got to ask you. You’ve talked to more brokers than I have, for more years than I have, over your career. You’ve seen more Q4 January one cycles than I have. If you could talk to the brokers out there, what… Any final parting thoughts before they head into what is always a crazy time of year?
Tom Stein: Well, if you haven’t talked to them by now, you’re way behind the curve. We try to get the renewals out 60 days early. It’s a tough time to come into somebody and pitch them on self funding, level funding for the first time. If you haven’t done it before now, you’re… It’s a different animal, so the employer goes, “I don’t know, maybe next year.” If you would’ve planted that seed last year, then this would be the year to move them. When they don’t get a big rate increase from a fully-insured plan, that either means they’re a good group or they’re awfully lucky to have a lot of good groups offset their losses. When a broker talks to you and you say, “What’s the health of the group,” and they go, “I don’t know.” Well, you’re not doing your job.
I mean, it’s just like, “Do they have group life insurance? How much of that do they need?” I don’t even know if they still have the uniform premium tax on 50 and over on life insurance. Disability income, we don’t sell it, but why you would have an employer pay a disability income plan, which is taxable in the event of disability, is beyond me. I’m healthy right now. I can afford to pay it. If I’m sick, how the hell am I going to pay my taxes? That doesn’t make sense to me. That’s all part of being a good broker, in my mind. You bring up the what ifs and show them various alternatives, and you hope that you’ve done a good job explaining it to them sure. Because if they don’t understand it, the answer’s no. Absolutely, every time.
Jason Powers: Wise words, my friend.
Tom Stein: There you go.
Jason Powers: Wise words. Well, that’s all we’ve got time for today. On your next proposal, be sure that you’re looking at AmeriShare as an option for your clients. If you’ve got questions about the proposal you get from our team, be sure to reach out to our folks here at Legacy Brokers. I can tell you that I know more about the ATA product than I probably do any of the other products that we have here at Legacy, only because that’s where I learned everything.
Tom Stein: That’s where he started, folks. That’s where he started.
Jason Powers: You guys have a great Q4. We’ll see you next time.
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