Upload
irea-white
View
213
Download
0
Tags:
Embed Size (px)
Citation preview
2
New Capital Resources Remarkable Opportunity
A Unique Advance Funding Model
Providing Capital Resources & Stability
Foundation for Healthcare Expense & Risk Trend Reversal
3
OGR Advanced Funding Model - History
Advance Funding Model
• Developed first in 1990’s as risk management program
• Included a funding transaction
Main purpose at that time:
1. Quantify a company’s future health care liability and financial risks
2. Pre-fund such liability for a 36 month term
3. Convert volatile and unknown variable future costs into a current fixed cost obligation
4
OGR Advanced Funding Model - History
Most Important to Today:
• Original Model has proven successful
• All maintained “fully collateralized” conditions
• None of original trusts have had to “unwind”
Fast-Forward:
• Original architect Jeff Bemoras partners with PFR to expand on model and roll out the One Global Resources Model nationwide on large scale…
• PFR in-turn brings in ROI – Health Data Resources to ensure ALL Client data is collected and utilized to recover and conserve capital
• PFR brings in the “missing link” by partnering with LifeStrive®, enabling TrendShift® Data Directed Health Trend Management
5
OGR Advanced Funding Model - TodayToday
Fast-Forward
Now Delivers Employers & Governments:
• Predictability / Monthly Identified Budget in a volatile cost environment• Savings related to the liquidity and its strength in negotiation with Fixed
Cost Providers. • Long Term Claims Management, Risk Trend reversal and associated cost
savings opportunity. • Reserve build-up for future buy-down of Health Care exposure beyond the
initial term. • Prepayment of future liability that may help to insulate Bond and/or Credit
Rating for client.
6
Cash Out
Trust Agreement“Trust”
•All cash invested in accordance with established investment policy
•No cash disbursed for claim payments or administrative fees unless coverage ratio adequate
Debt Service
Claim Payments
AdministrativeFees
Cash ProceedsFrom Loan
Employer Monthly
RemittancePayments
Cash In
Interest Income
One Global Model-Cash Flow
Flow of Funds DiagramTrust Certificates
7
“Cash Flow-Fully Insured”
$133,563,648.M
Employer’s ObligationRemittance = $3,816,867.34
Fixed for 36 Months
Grantor Trust
Issues Debt
Trust PaysPrincipal& Interest
FIXED Financing Rate1.85%
Gross Savings = $6,138,415.20Net Savings=$4,802,779.20
•Budgetability / Predictability•Stability•Negotiated Discounted Premium•Identified Savings
Day 1 Trust wires all funds to Carrier $133,563,648.M
ESCROW Account
Insurers Rate of Return2.25%
$4,544,459.00
8
“Self Insured Case Example”
V = 85%FC = 15%R =
Employer’s ObligationRemittance = $1.9MFixed for 36 Months
95% Actuarial Confidence Level
$78.1MFIXED Financing Rate FIXED Investment Rate
• Budgetability / Predictability• Arbitrage (Investment Opportunity)• Balance Sheet implication-Footnoted on P & L
Fully Collateralized‘Aaa’ Rated Grantor Trust
P & I V
FC
Surplus = $6.9MYears 4-6Tax-Free
Rolling Reserve
Investment
Issues Debt
‘ALL-IN’ 3 YEAR COST
1.85% 2.25%
9
Advanced Funding Elements
Grantor Trust- Becomes the Obligor of the Debt, acts like a Single Purpose Entity established to isolate the client from financial risk.
Escrow Agreement- Established in conjunction with Fully Insured Transactions
Remittance Agreement- Client’s Obligation under the Trust are simply to remit once a month for 36 months...
Independent Trustee- established to manage disbursement of funds, and monitor sufficiency and investment criteria.
e.g. Joint Powers Authority, Wells Fargo Bank etc.
101% Cash Collateralized Equity to Debt Position -Trust is security for the Note. Funds inside the trust are always over cash collateralized.
10
Employer’s Perspective
Employer Advantages
• Provides Longer Term Predictability
• 3 years of Fixed Premiums
• Establishes an Identified Long-term Budget
• Generates Cash Flow opportunities- Investment Arbitrage
• Establishes longer term focus on Cost Reduction, through Audit Profiles, and Data Directed Health Trend Management
• OPEB-GASB Implications - Reduces Possible ARC Payments
- Improvements in Bond ratings
11
Carrier Perspective
Advantages for the Carrier
• 3 years premium funded in advance, day one - Fully Insured
• 3 year membership lockdown, per customer
• Increased persistency rates provide stability to block
• Eliminate marketing costs on renewals for 3 years
• Solidify relationships with broker/ consultants
• Marketing opportunity to gain significant new membership
• Reduced Actuarial and Underwriting Costs associated with constantly having to Re-Up the client
12
“Data Needs”
Data Requirement
• All office locations
• SIC code
• 3 years premium history for medical/Rx (past 3 renewals)
• Census including: gender, DOB, coverage level
• Summary plan designs for last 3 years
• Indication of any major population shifts
• Projected trend for the next year
• Any large claims in excess of $20K
13
“The Process”
Steps in the Process- Gathering Data (Phase 1)
Compilation three years of claims data
-Analysis and Assessment of Claims data (Phase 1)
Evaluating growth/trend
- Formal Presentation (Phase 1)
Presentation of the Funding Model and findings
- Evaluation of current data and Final presentation to client (Phase 2)
Taking into account all outstanding variables and current information
- Funding Process & Implementation (Phase 3)
Matching clients requirements with Funding and Investment criteria
- On Going Evaluation and reporting (Phase 3)
Healthcare Report card, analytics and sufficiency testing
14
“Final Agreements”
Phase Process
- Phase 1 Gathering Data
This Phase allows us to collect data, evaluate claims and report back to the client
- Phase 2 Final Presentation
This Phase allows us to update information, pull together any outstanding variables and present to the client prior to funding
- Phase 3 Funding
This Phase allows our specialists to take the program to the financial markets for funding and implementation