Why is Employee Demand for these Coverages Rising?
Heading into 2022, medical cost trend remains stable yet unsustainably high as healthcare costs continue to rise according to PWC. HRI projects 2022’s medical cost trend to be 6.5 percent. This is consistent with the previous five years, which have seen trends between 5.5 and 7 percent. Efforts to cut utilization have run their course and prices have continued to grow. This has put significant pressure on employer sponsored health insurance plans.
Average Annual Premiums for Single and Family Coverage 1999-2020
Source: KFF Employer Health Benefits Survey, 2020
Average Annual Health Plan Deductible for Single Coverage 2006-2020
Source: KFF Employer Health Benefits Survey, 2020
Soaring Out-of-Pocket Maximums
Most workers also face additional cost sharing for a hospital admission or outpatient surgery. After any general annual deductible is met, 68% of covered workers have coinsurance and 14% have a copayment for hospital admissions. The average coinsurance rate for a hospital admission is 20% and the average copayment is $326 per hospital admission. The cost-sharing provisions for outpatient surgery follow a similar pattern to those for hospital admissions. While almost all (99%) covered workers are in plans with a limit on in-network cost sharing (called an out-of-pocket maximum) for single coverage, there is considerable variation in the actual dollar limits. Twelve percent of covered workers in plans with an out-of-pocket maximum for single coverage have an out-of-pocket maximum of less than $2,000, while 20% have an out-of-pocket maximum of $6,000 or more.
- 6 in 10 Single Plans have a $3,000 Out-Of-Pocket Max
- 1 in 5 Single Plans have a $6,000 Out-Of-Pocket Max
- $4,065 is the Average Out-of-Pocket Max
Further evidence of the need for voluntary benefits:
The majority of Americans are worried about being able to afford surprise medical bills.
How worried, if at all, are you about being able to afford each of the following for you and your family?
On average, 18% of emergency visits result in at least one out-of-network charge, but the rate varies by state.
The percentages shown are among people with large employer coverage, the share of emergency visits with at least one out-of-network charge, 2017.
BeneRe Reinsures 100% of participating members’ voluntary benefits.
Contact us to learn more about how this works.
1. Employees enroll in the supplemental benefits program as part of open enrollment. Their payroll deductions are sent to the insurance company that is fronting the program. The employees enjoy the full faith and credit of the carrier fronting the program, meaning there is no financial risk to the employees.
2. Insurance company administrates the program as any other standard program. They issue policies for employees, handle customer service, adjudicate claims, etc.
3. The captive difference is that BeneRe reinsures 100% of the risks from these employer sponsored programs while still allowing all premiums to be held by the insurance company. This means that the insurance carrier holds the dollars until the final claims are paid for the policy period, thus providing extra protection for the employees. Note: All risks from participating employers are aggregated and the resulting loss experience is calculated on a composite basis.
4. Upon policy year end, premiums net of claims and expenses are released to BeneRe and further distributed on a pro-rata basis to all participating plans. Total expenses run 40%, which includes carrier fees, client service, captive management, compliance, broker commissions and taxes, leaving 60% of premiums to pay claims. If claims run at 50%, the employer would receive a distribution at the end of the policy year. If claims ran better or worse than expected; the distributions would be subject to change.
Putting Distributions to Work
All distributions earned by participating employers must be reinvested in any ERISA covered plans, which are included in the company’s Summary Plan Description (SPD). This affords the human resources staff wide latitude in determining how to spend the money. Employers can use the funds for health or financial wellness programs, benefits administration expenses, enrollment communications, HSA funding, or a multitude of other important initiatives. In essence, employers must abide by the same ERISA rules that already apply.
For employers that are not subject to ERISA, including governmental and certain non-profit entities, participation is welcome and greatly simplified. Please contact us for details and certain options that are not available to for profit companies.
Only after significant research supported by multiple Opinion Letters did VOYA and BeneRe decide to launch this captive insurance initiative. Substantial positive benefit is being provided to employees and employers alike. Summary bullet points are provided below:
- To join BeneRe, employees must receive the same or better coverage at same or better price for in-force plans; for new employer programs, VOYA’s underwriting team develops the pricing blind to the existence of the captive (meaning standard underwriting methods)
- VOYA is the fronting carrier for the BeneRe program – thus the full faith and credit of the carrier backs all employee claims
- VOYA is also responsible for client service and claims adjudication for all employees (thus protecting their brand)
- Participating employers must treat the BeneRe coverages as ERISA governed (Accident, Critical Illness and Hospital Indemnity)
- Assets of the captive are funds-withheld with VOYA during the policy period and distributions are calculated on an aggregate but pro-rata basis (third-party experience), negating any self-dealing potential
- In the event of a claim fund shortfall, participating employers are NOT responsible for any downside risk; Only BeneRe’s core capital is at risk
- Employers must re-invest into their employer-sponsored plans any and all distributions they receive from the captive; case law supports the use of these funds for ANY benefit covered under an employer’s SPD document for ANY subset of the employee population