Self Funded Nerd Camp

[Lar Jep]

Did anyone get the self funded indemnity to POS problem to work out? I wasted lots of time on it and still came out with garbage that I didn't enjoy.

[Guy Smiley]

Did anyone get the self funded indemnity to POS problem to work out? I wasted lots of time on it and still came out with garbage that I didn't enjoy.

I think so. What I did was calculate what percentage of in-network utilization would be necessary under the POS plan to save 1,000,000 in claims. I think it was about 87%.

[regan842967]

I found that total savings depending on network utilization of the POS product. I think it ended up needing at least ~62% in network utilization in order to save $1,000,000 in claims.

[regan842967]

I think so. What I did was calculate what percentage of in-network utilization would be necessary under the POS plan to save 1,000,000 in claims. I think it was about 87%.

Did you do the calculation based on employer cost or total claims cost?

[Guy Smiley]

Did you do the calculation based on employer cost or total claims cost?

Total. It wasn't clear, but I think it said they could reduce incurred claims costs by 1,000,000, so I figured it applied to both the employer and employee together. I'm sure if you assumed it was just the employer, that is fine as long as you state your assumption (which is did).

[That Goblin]

I think so. What I did was calculate what percentage of in-network utilization would be necessary under the POS plan to save 1,000,000 in claims. I think it was about 87%.

<ding>

(this is based on savings to the employer. Who gives a .... about saving money for the employee?)

[regan842967]

Total. It wasn't clear, but I think it said they could reduce incurred claims costs by 1,000,000, so I figured it applied to both the employer and employee together. I'm sure if you assumed it was just the employer, that is fine as long as you state your assumption (which is did).

I thought they gave you employer claims cost of something like $6,000,000, and they stated that 25% of total cost was paid by employees, so total cost would be $6,000,000 / (1-.25). No?

[Lar Jep]

How did you work in the change in coinsurance for network or not? This problem was worth 4 points, so I guessing it was supposed to be pretty involved.
I will work on it at work tomorrow. Beer time.

[regan842967]

<ding>

(this is based on savings to the employer. Who gives a .... about saving money for the employee?)

I though the consultant just said "save $1,000,000 in claims", not "$1,000,000 in claims to the employer".

[Lar Jep]

regan is correct on claims part

[regan842967]

The problem stated that a change in coinsurance would have no impact on utilization, so a changing coinsurance would only change the amount paid by the plan. So if you're moving from the 85% to the 90% coinsurance of the POS, the impact is .90/.85.

[Badger484]

I found that total savings depending on network utilization of the POS product. I think it ended up needing at least ~62% in network utilization in order to save $1,000,000 in claims.

this is what I got as well

[Lar Jep]

I am concerned about the non-coinsurance employee part. If employees are contributing 25% of expected claims originally and coinsurance is 85%, how does the math work out when you go to a 90- 70 split? Where does the other 10% of employee cost go?

[Guy Smiley]

I thought they gave you employer claims cost of something like $6,000,000, and they stated that 25% of total cost was paid by employees, so total cost would be $6,000,000 / (1-.25). No?

I agree. That is what I used to get my answer.

[Guy Smiley]

I am concerned about the non-coinsurance employee part. If employees are contributing 25% of expected claims originally and coinsurance is 85%, how does the math work out when you go to a 90- 70 split? Where does the other 10% of employee cost go?

The 25% does not count the actual plan cost-sharing. The EE contribution is set to be 25% of the paid claims. So in total, EE's are paying more than 25%.

[regan842967]

It would be really helpful to have the question in front of me. But this was a self-insured plan, and I read the 25% contribution to be that total employee expenditures paid for 25% of total claims. This way it would include premiums and cost-sharing. I could be wrong here, but there wouldn't be any other way to reconcile the 85% coinsurance of the original indemnity plan with the employees paying 25% of cost that I can see.

PS if i keep this up I could end up doubling my post count tonight.

[Guy Smiley]

Here is the information that was given:

Current indemnity plan pays 85% coinsurance. Consultant suggests switching to a POS plan with 90%/70% coinsurance. Consultant says this will save 1,000,000 in claims.

The trend assumptions are: 16% for indemnity, 12% for in-network POS, 18% for OON POS (I have no idea why this would be higher than the indemnity trend, by the way). The POS in-network also has cost-savings of 2% and discount of 10%.

This year's claims were 6,000,000. The employees currently pay 25% of the claim costs. I guess maybe it isn't clear whether this includes cost sharing or not, but I took it not to.

The question is, is the savings of 1,000,000 possible (and how)?

Let us assume in-network utilization under POS is X%. This year's total claims were 6,000,000/(1-.25) = 8,000,000. Under the indemnity plan, next year this would be 8,000,000 (1.16) = 9,280,000. If we want to save total claims of 1,000,000, that means we want the POS plan to have expected claims of 8,280,000.

The POS claims will be:

8,000,000 * ((.9/.85) * 1.12 * .98 * .9 * X% + (.7/.85) * 1.18 * (1-X%)) =
8,000,000 (.07418 X% + .97176). Setting equal to 8,280,000 and solving for X gives: 85.2%.

[That Goblin]

Actually, I remember this question now. This is word for word exactly what I put.


"I don't give a damn about saving self-funded groups money. Its not my dime. I'm not taking on any risk. If the self-funded wants to save money so bad, why aren't they talking to a consultant? It seems odd that I'm discussing saving money for a self funded group with a consultant in the first place. Are we even sure the consultant is real? Has anyone check the consultant's credentials? Can we even prove that the consultant isn't just a figment of my imagination or perhaps the whole thing is just a lucid dream!"

[regan842967]

What I did was

9,280,000 * ((.9/.85) * .98 * .9 * X% + (.7/.85) * (1-X%)) = 8,280,000

which is probably wrong now that I think about it. I used what the trended indemnity claims were, and then figured out what the network utilization would have to be using those claims to save $1,000,000. Of course, this ignores the different trends IN vs. OON. Ugh, carry on.

[BuckyBadger]

Here is the information that was given:

Current indemnity plan pays 85% coinsurance. Consultant suggests switching to a POS plan with 90%/70% coinsurance. Consultant says this will save 1,000,000 in claims.

The trend assumptions are: 16% for indemnity, 12% for in-network POS, 18% for OON POS (I have no idea why this would be higher than the indemnity trend, by the way). The POS in-network also has cost-savings of 2% and discount of 10%.

This year's claims were 6,000,000. The employees currently pay 25% of the claim costs. I guess maybe it isn't clear whether this includes cost sharing or not, but I took it not to.

The question is, is the savings of 1,000,000 possible (and how)?

Let us assume in-network utilization under POS is X%. This year's total claims were 6,000,000/(1-.25) = 8,000,000. Under the indemnity plan, next year this would be 8,000,000 (1.16) = 9,280,000. If we want to save total claims of 1,000,000, that means we want the POS plan to have expected claims of 8,280,000.

The POS claims will be:

8,000,000 * ((.9/.85) * 1.12 * .98 * .9 * X% + (.7/.85) * 1.18 * (1-X%)) =
8,000,000 (.07418 X% + .97176). Setting equal to 8,280,000 and solving for X gives: 85.2%.


Dear Guy Smiley,

I think the fact that you memorized the whole problem is a strong indicator to the fact that you are going to get a 9 or a 10 and have no need to continue posting here or dealing with any mere mortals. You are only making us folks hoping to get a 6 or 7 feel stupid. Please go and use your incredible memorization and intellectual ability to some more worthwhile endeavor. :wave:

Most sincerely,
Bucky

:-P

[That Goblin]

Dear Guy Smiley,

I think the fact that you memorized the whole problem is a strong indicator to the fact that you are going to get a 9 or a 10 and have no need to continue posting here or dealing with any mere mortals. You are only making us folks hoping to get a 6 or 7 feel stupid. Please go and use your incredible memorization and intellectual ability to some more worthwhile endeavor. :wave:

Most sincerely,
Bucky

:-P

I didn't memorize any problems. Am I going to fail? :(

[Lar Jep]

3 things I am sure of:
I could reproduce most of the problems from memory.
I did not get a nine or ten.
Beer is good.

[That Goblin]

3 things I am sure of:
I could reproduce most of the problems from memory.
I did not get a nine or ten.
Beer is good.

Not the beer I drank. Paradigm shift?

[micaelagb]

Hmmm...I took the 25% to mean that EE's funded 25% of the plan--premium to the self-funded plan. So plan costs were $8 mil. Total health claims were 8/.85=9.41 mil.

When I worked it out, it came to exactly 80% in-network for the PPO needed to reduce claims by $1 mil in the next year.

Also threw in a bit about how the discounts wouldn't offset trend going forward--this is a one-time savings.

[The Head Detective]

This question sucked.

Employees contribute 25% of expected claims AND pay 15% coinsurance. The employer portion would be net of those two things, right? So aren't total incurred claims $6M/(1-.25-.15) = $10M? This of course assumes that the $6M didn't include ASO fees, which also wasn't clear from the question but I guess it has to be.

I did what Guy did and figured out what % would have to be OON for the $1M to be achieveable. Except
1) I forgot to factor in the 10% IN provider discount (although I realized this at the end and noted it, maybe they'll give me something) and
2) I based the $1M on the employer contribution amount. It was not clear to me what they were looking for. I noted this in my answer too.

I hate sucking on 9 point questions.

[Tests]

I felt there was a point missing in the question because they didn't give us what the in-network vs out-of-network usage assumption was, so I stated a 90%/10% assumption before working the problem. With that information, there was not a $1M savings. How can you properly map the costs without that piece?

In order to calculate total claims costs, you need to get to a gross allowed claim, so you need to divide by 75% to get to the sponsor's claim cost, then by the coinsurance to get allowed claims cost. From that point you can transfer what the costs would be in the POS environment by applying the managed care savings and discount for in-network and out of network separately. You apply the coinsurance for each piece, then add the pieces together to get revised expected claims and apply the 75% employer contribution to claims to get final cost to compare with the original. Thoughts?

[Guy Smiley]

Hmmm...I took the 25% to mean that EE's funded 25% of the plan--premium to the self-funded plan. So plan costs were $8 mil. Total health claims were 8/.85=9.41 mil.

When I worked it out, it came to exactly 80% in-network for the PPO needed to reduce claims by $1 mil in the next year.

Also threw in a bit about how the discounts wouldn't offset trend going forward--this is a one-time savings.

Sounds like a valid approach to me. The problem obviously wasn't very clear, and hopefully the SOA will accept multiple interpretations.

I felt there was a point missing in the question because they didn't give us what the in-network vs out-of-network usage assumption was, so I stated a 90%/10% assumption before working the problem. With that information, there was not a $1M savings. How can you properly map the costs without that piece?

In order to calculate total claims costs, you need to get to a gross allowed claim, so you need to divide by 75% to get to the sponsor's claim cost, then by the coinsurance to get allowed claims cost. From that point you can transfer what the costs would be in the POS environment by applying the managed care savings and discount for in-network and out of network separately. You apply the coinsurance for each piece, then add the pieces together to get revised expected claims and apply the 75% employer contribution to claims to get final cost to compare with the original. Thoughts?

I do not think there was a point missing in the question. They wanted to you calculate the necessary in-network utilization. Of course, there were other things about which they weren't entirely clear.

[Guy Smiley]

Dear Guy Smiley,

I think the fact that you memorized the whole problem is a strong indicator to the fact that you are going to get a 9 or a 10 and have no need to continue posting here or dealing with any mere mortals. You are only making us folks hoping to get a 6 or 7 feel stupid. Please go and use your incredible memorization and intellectual ability to some more worthwhile endeavor. :wave:

Most sincerely,
Bucky

:-P

Although I have done well on the prelims, this is my first essay exam and I really don't have any idea how I did.

As far as memorizing problems, I think it is largely an accident that this one sticks in my head so strongly. Although if I thought hard I could probably recall some of the other problems too.

[BuckyBadger]

Although I have done well on the prelims, this is my first essay exam and I really don't have any idea how I did.

As far as memorizing problems, I think it is largely an accident that this one sticks in my head so strongly. Although if I thought hard I could probably recall some of the other problems too.

The tounge sticking out at the end meant I was just foolin'

I do think you probably passed though.

[cubedbee]

Here is the information that was given:

Current indemnity plan pays 85% coinsurance. Consultant suggests switching to a POS plan with 90%/70% coinsurance. Consultant says this will save 1,000,000 in claims.

The trend assumptions are: 16% for indemnity, 12% for in-network POS, 18% for OON POS (I have no idea why this would be higher than the indemnity trend, by the way). The POS in-network also has cost-savings of 2% and discount of 10%.

This year's claims were 6,000,000. The employees currently pay 25% of the claim costs. I guess maybe it isn't clear whether this includes cost sharing or not, but I took it not to.

The question is, is the savings of 1,000,000 possible (and how)?

Let us assume in-network utilization under POS is X%. This year's total claims were 6,000,000/(1-.25) = 8,000,000. Under the indemnity plan, next year this would be 8,000,000 (1.16) = 9,280,000. If we want to save total claims of 1,000,000, that means we want the POS plan to have expected claims of 8,280,000.

The POS claims will be:

8,000,000 * ((.9/.85) * 1.12 * .98 * .9 * X% + (.7/.85) * 1.18 * (1-X%)) =
8,000,000 (.07418 X% + .97176). Setting equal to 8,280,000 and solving for X gives: 85.2%.

FWIW, this is exactly what I did/got as an answer.