The basic premise of The Jefferson Health Plan is that an individual member organization's claims experience is pooled with that of other members in an effort to provide greater stability for each member organization. The consortium then helps to cushion the random effect of large claims for individual employers by offering varying levels of deductible to suit the needs of the individual member organization. Larger organizations are able to accept more risk and, therefore, may want a specific deductible of $100,000 or $150,000, but smaller organizations can opt for either a $50,000 or $75,000 deductible. This pooling, subject to continuing Board of Directors review and approval, is accomplished in the following manner:
• Member Organization Experience Pool
• Large Claims Reimbursement Program
• Stop Loss Insurance
• Aggregate Protection Plan
• Specific Deductible
• Professional Auditors
• Full Disclosure
• Funding Guidelines
• Funding Moratoria
• Supplemental Accruals
• Funding Process
Member Organization Experience Pool
First dollar up to the member group's selected deductible for any individual plan participant is charged to the individual member organization's experience pool.
Large Claims Reimbursement Program
Beyond the member group's selected deductible level, claims for any individual plan participant during a fiscal year are covered by the Large Claims Reimbursement Program maintained by The Jefferson Health Plan.
Stop Loss Insurance
$1.5 million of claims during a fiscal year for any individual plan participant is covered by umbrella stop loss insurance obtained by The Jefferson Health Plan from a top tier carrier.
Aggregate Protection Plan
The Jefferson Health Plan also offers to member organizations, through the Large Claims Reimbursement Program, extra protection from the wide swings in medical claims that may occur from time to time. This protection, known as the Aggregate Protection Plan, is available to members after two full fiscal years of participation in the consortium and caps a member organization's claim cost below the specific deductible level chosen by the member group to an inflated average cost per employee for the member.
Finally, claim deficits in a member organization's experience pool are recovered over a two- to three-year funding cycle, thus helping member organizations spread the effect of a "bad claim" year over a longer period. Consequently, The Jefferson Health Plan offers member organizations a means to temper the financial burden of a "bad" year.
Specific deductible coverage offers protection to the employer against the severity of random, large claims incurred by an individual plan participant covered under the plan. Employers choosing a specific deductible level should consider the expected severity and frequency of such large claims, as well as the employer's tolerance for the risk of accepting large losses.
Under a specific deductible policy, which in the case of The Jefferson Health Plan is sponsored through its Large Claims Reimbursement Program, whenever a plan participant has paid claims that exceed the amount of the predetermined specific deductible, the coverage provided under the specific deductible reimburses the employer's claims above the deductible amount. So, for any given plan participant having eligible paid claims in a fiscal year above the deductible, the Large Claims Reimbursement Program reimburses the employer for the amount above the deductible. In other words, the employer pays for the claims up to the specific deductible, with the paid claims for any individual above the specific deductible chosen by the employer reimbursed by the Large Claims Reimbursement Program.
Claims eligible for specific stop loss reimbursement under the Large Claims Reimbursement Program are those paid during the fiscal year of the Large Claims Reimbursement Program, which runs from July 1 through June 30. To protect itself from very large claims, the consortium also obtains umbrella stop loss coverage from a solid reinsurer.
The Jefferson Health Plan has retained independent auditors to prepare the financial statements of the organization and its individual member groups. These auditors are tasked with the financial oversight of the consortium and work in conjunction with the plan's underwriters and trustee bank. The books of the consortium are prepared in accordance with generally accepted accounting principles for cash balance accounting.
The fiscal officer of each member organization can easily monitor account transactions online through the services of the trustee bank 24 hours a day. This ability to track the progress of the benefit plan's costs provides an invaluable insight into the underlying costs and trends affecting the member organization's plan, meaning there are no surprises at renewal. Daily account tracking provides a detailed ability to track the progress of the program throughout the year, alerting in advance a member group of the need for rate modifications.
No vendor providing services to the consortium is permitted to accept any form of remuneration from any other vendor providing services to the consortium. That means that all fees paid to administer this program are fully disclosed to member organizations. There are no hidden fees, and fees are detailed each month with the release of financial statements to member groups.
Overall, the consortium has kept administrative costs in the range of 6% for the last several years, since its mission as a non-profit organization is to provide cost effective services to its member groups. These low administrative costs, compared to those of its competitors, mean more dollars go toward paying claims of member participants, and not to profits of insurance companies, or bloated administrative salaries.
All vendors and service providers working with the consortium are paid on a fee-for-service basis, meaning there are no hidden commissions, overrides, profitability or retention bonuses, and no undisclosed financial incentives for these vendors to direct business - other than to provide quality service to member groups.
Importantly, as the conduit through which the member groups provide self-insured benefits to their employees, the monthly accruals paid by employers into the consortium are exempt from Ohio tax.
The Jefferson Health Plan maintains a set of funding guidelines. Adopted by the members and periodically updated, these guidelines establish the rules for determining required funding levels each year for individual member organizations and the plan as a whole. Funding requirements for individual member organizations are expressed as monthly "funding factors" or "accrual rates" established on a per-employee or per-family basis.
During each annual renewal evaluation, the reserve balance of each member organization is reviewed. If a member organization's reserve balance held by The Jefferson Health Plan exceeds the amount required under the consortium's Funding Guidelines by the equivalent of one or more months of the member organization's funding factor accrual, the member organization may apply for a Funding Moratorium.
Just as a member organization can experience surplus funding and, therefore, realize a funding moratorium, a member organization can find itself having to fund a deficit accrued over one or more years. Unlike an insurance company, which may require an immediate premium recovery to recoup a deficit, The Jefferson Health Plan allows deficits to be funded over a two- to three-year period. These deficit recoveries are paid back to The Jefferson Health Plan through the use of supplemental accruals, which are added to the annual funding factors to achieve deficit recovery over a two- to three-year funding cycle.
On an annual basis, member organizations fund their share of The Jefferson Health Plan's Large Claims Reimbursement Program according to the minimum funding factors or accrual rates established by the Board of Directors.
Each member organization maintains an IBNR reserve with the Plan. This reserve is determined actuarially as adequate to fund the required Ohio Revised Code claim liability for the member organization.
In addition to the IBNR reserve, each member organization is required to maintain a claims fluctuation reserve equal to 15% of projected annual claims. Alternatively, the member organization may provide for an appropriate level of margin in its funding factors to provide for a combined claims fluctuation reserve (i.e., reserve funds plus margin in funding factors) equal to 15% of projected claims. Reserves held by a member group in an account not maintained by the consortium cannot be used to satisfy any portion of the IBNR or claims fluctuation reserve required by consortium membership.
Member organizations are encouraged to maintain catastrophic claims reserves equal to 150% of the maximum per claim exposure (specific to stop loss deductible). Trusts, which may also participate in the consortium, must maintain adequate claims fluctuation reserves, but may not be required to establish catastrophic claims reserves.