The Basics of Self Funded Health Plans for Small Employers

1. The Basics of Self Funded Health Plans for Small Employers Brought to you by: Allied National February 2014 11084s1212 Edition 12.18.12

2. Topics Covered Today • Who is Allied? • Why Self Funding Today? • Affordable Care Act Impact • What is Self Funding? • Is Self Funding Right for YOU? • What is ERISA? • What is Funding Advantage? • Underwriting Self Funding • Next Steps

3. Allied National Innovation Stability Service 3

4. Why Would a Small Business Want to be Self Funded? Projected Self Funding Costs

5. Adverse Impact of Affordable CareAct on Fully Insured Employers Increases Cost $ Premium taxes Community rating Minimum essential coverage 3:1 age slope rating Coverage mandates Guarantee Issue Pre-ex included 5

6. What is Self Funding? 6

7. Stop Loss Insurance Employer’s risk is minimized 7

8. Why Self Funding 8

9. Sample Small Employer Self Funded Program – 55 lives

10. Self Funded Claim PaymentSample $60,000 Claim Employers Specific Stop Loss $33,000 Paid by Stop Loss Carrier Employers Aggregate Stop Loss Employers Specific Stop Loss Limit - $25,000 $25,000 Paid from employers claim fund Employers Claims Fund $2,000 Paid by employee 10

11. Self Funding “on training wheels” 5 to 250 lives Self funding made “SIMPLE” Prepackaged plan docs, integrated specific and aggregate stop loss policy Level monthly payment plan Terminal liability coverage included Medically Underwritten What is Funding Advantage? 11

12. Funding Advantage Simplified Self Funding • Level monthly payments • Protection against large claims or unfavorable claims experience • No hidden fees of ‘pass through’ costs 12

13. Who is the ideal candidate • Healthy groups • Desires lower long-term costs • Experiencing adverse premium impact from ACA • Desires greater control and flexibility • Needs better claims reporting • Promotes health and wellness with employees • Desires predictable cash flow 13

14. Self Funded Group Health Plans are subject to “ERISA” regulation. What is ERISA? Employee Retirement IncomeSecurity Act 1974 14

15. ERISA enables self funding 15

16. Role of Self Funded Plan Administrator • Assist with plan design • Underwrite Stop Loss contracts • Assist with plan communications • Provide network access • Claims payment • Claims management • Provider negotiations • Reporting and compliance services 16

17. Allied National’sUnique Underwriting Philosophy TODAY Traditional Underwriting Past history Price based on past health history, experience, industry trends, and industry loads Allied National Underwriting Future costs Price based on futurehealth care costs

18. Allied National’sUnique Underwriting Methodology Traditional Census & Plan Design Industry Trend + Group Experience + Underwriting = Renewal Rate Allied National Underwriting Individual Medical Applications Current Health Condition x Current Health Care Cost = Projected Costs

19. Self Funding Sample Case Study 85 Employees $6.5M Sales - pretax profit 12% Renewal Premium $612,000 Self Funded Program $610,000 Employer’s Loss Fund $366,000 Projected Refund 20% ($73,200) Net Cost $536,800 Refund = 9.3% of profit 19

20. Next Steps Agent contacts Allied Current census Plan design & benefits Current and renewal billing

21. Process Initial Proposal (Indication) Completed Applications Final Proposal Accept Terms Install Self Funding

22. Thank you! For more information: Allied Sales Support 888-767-7133 www.alliednational.com sales@alliednational.comtwitter.com/alliednational Fax: 913-945-4396 Allied National, Inc.4551 W. 107th St. #100Overland Park, KS 66207 This is an invitation to inquire about the Allied Funding Advantage plan. This is a limited description of the plans. See plan brochure and plan documents for complete details.