1. What is an ideal company for ACBG?
Any forward thinking contractor that is (a) spending $1,000,000 a year or more on direct medical and pharmacy costs, (b) understands that the health and productivity of their workforce is a risk that must be managed and (c) understands the value of sharing risk with and learning from a group of first class contractors all focused on managing the risk more effectively.
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2. We already have a safety program, why do we need an employee health and productivity risk management program?
Safety and wellness go hand in hand. They are both long-term culture-changing processes that must be reinforced every day. There are numerous studies that show that a healthy and fit employee has fewer accidents on the job. Therefore, a health and productivity risk management program will also improve your safety program. Remember, medical and pharmacy costs are only 25% of your total cost of healthcare. 75% of the total is indirect costs including workers comp and disability insurance, absenteeism and presenteeism. Therefore, for every dollar of direct medical and pharmacy savings, you will gain another $3 in indirect savings.
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3. Why can’t we do it without ACBG?
One of the biggest advantages of Membership in ACBG is the knowledge that a contractor gains from the synergy of the group. Our group of dedicated Members have invested over 5 years developing 2 unique processes, The Lean Health Insurance Advantage and The ACBG Edge. Your learning curve will be dramatically shortened by utilizing these processes and by learning from our experience. The savings that you will achieve by reaching Champion Company status in a shorter period of time will far exceed the frictional cost of the captive.
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4. Why should I act now?
The "natural flow" of your workforce is toward becoming older, less healthy and having higher healthcare costs. The longer that you wait to address the problem, the worse the problem becomes. Declining health and productivity left unchecked is like equipment left to rust. You maintain your equipment, why would you not have a program in place to maintain your most valuable asset, your employees?
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5. How does the ACBG captive work?
ACBG is a group captive insurance company. A captive insurance company is owned by the companies that it insures. Each Member company wears two hats, one as an insured and one as an owner of the insurance company. Currently, ACBG is owned by 6 Members; JD Abrams, Total Risk Management, Jaynes Corporation, Duininck companies, Phillips & Jordan, and Heussner Enterprises.
The Members of ACBG own a portion of their risk and they share a portion of their risk with each other. Currently, our risk sharing profile is as follows:
Excess Layer: Between $250,000 and $2,000,000
Pooled Layer: Between $100,000 and $250,000
Contractor Layer: From 0 to $100,000
The insurance company is designed to make a 10% profit. As an insured, the Member is not liable for claims in excess of $100,000 that fall into the Pooled and/or Excess Layers. The Members’ Pooled Layer premium is equal to their expected claims plus their share of expenses plus the 10% profit margin. ACBG cedes 100% of the Excess Layer risk to a reinsurer. Each Member pays their prorata share of the excess reinsurance premium plus a 10% markup.
Our Members manage their risk more effectively because they own the risk and they share the risk with similar contractors. The more effectively each Member manages their risk in the pooled layer, the more equity that they build. A Member’s equity grows based on the ACBG equity allocation formula and Members are rewarded for placing profitable business with the company.
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6. What are the benefits of ACBG?
ACBG is the first and most experienced captive insurance company of its type. ACBG is comprised of a holding company with an insurance company subsidiary, ACBG Risk Retention Group, Inc., and a risk management subsidiary, Contractor’s Risk Management Services, Inc. (CRMS). CRMS is singularly committed to helping our contractor Members manage the health and productivity risk of their employees. We have a keen insight into the "Total Cost of Healthcare" for our Members. According to the University of Michigan’s Health Management Research Center (HMRC), medical and pharmacy costs are only 25% of the equation. Indirect costs like workers compensation, disability, absenteeism, and presenteeism make up 75% of the cost. That means for every $1 that we help you save in direct medical and pharmacy costs, you will save another $3 in indirect costs. We have two custom designed unique processes, The Company Triage and The ACBG Edge Process. These processes enable our contractor Members to go from a position of having their medical and Rx costs out of control to "Zero Trend" in just 3 years. Zero Trend means that their year over year increase in medical and Rx cost is 0%.
The impact of our processes is proven. Milliman, our actuarial consultant, calculated that the ACBG Members’ medical and Rx costs increased at an average annual rate of 6.25% from 2007 through 2009, as compared to the national average of 10.9% over the same period. This equates to a $5.6 million savings. Furthermore, Milliman projects that the ACBG Members’ costs will increase at 2% in 2010, generating another $5.2 million in savings. The projected increase for 2011 is 0%.
The HMRC is a valuable partner of ACBG and provides expert analyses, reporting and recommendations to our Members. The HMRC receives medical and Rx claims data as well as data from a variety of vendors. They then benchmark each Member’s performance against the others and against industry and national averages. Lastly, they provide each Member with actionable strategies to further improve performance. All of this information is combined with ACBG generated reporting giving you a management ready arsenal of reports that guide decision making and prove the impact of the program.
The employees of ACBG receive incentive compensation based on the amount of money our Members save, not the total that they spend on premium, as is the norm with insurance companies. As a result, all of the team members are working together to achieve the same goals.
Engagement with ACBG begins with our unique process, "The Company Triage". The Triage is a 7-step process designed to trim the waste out of your healthcare plan and place you on the most efficient financial platform enabling you to achieve your goals. The analytical work in the Triage is completed by ACBG and two of the Nation’s leading healthcare consultants, Milliman and the University of Michigan’s Health Management Research Center. The Triage provides you with actionable strategies that allow all of the parts of your healthcare plan to work in concert without wasting your time, money, or energy.
Membership in ACBG also allows you to leverage group purchasing power, gain knowledge through the synergy of the group, and build equity. You share risk with the most proactive and forward thinking contractors in the business and you profit from the results of our risk management programs. Through our programs and processes your company will experience drops in workers’ comp and disability insurance costs, absenteeism and presenteeism, which trigger gains in productivity and profitability.
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7. What is Zero Trend?
A company achieves zero trend when the year over year increase in their healthcare costs is zero.
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8. What is a Champion Company?
A Champion Company, as defined by Dr. Dee W. Edington is his book, "Zero Trends, Health as a Serious Business Strategy", is a company that manages the health and productivity of their workforce so effectively that the year over year increase in their healthcare costs is zero.
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9. Will I be able to measure my success/ROI?
Yes, ACBG has a comprehensive reporting package that includes ROI analyses by both the HMRC and our actuary, Milliman.
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10. What is the potential wellness ROI?
A contractor can expect to save a minimum of $3 for every $1 invested in their wellness program. Once Champion Company status is achieved your savings will be much greater. Medical and pharmacy costs are only 25% of your total cost of healthcare. 75% of the total costs are indirect costs including workers comp and disability insurance, absenteeism and presenteeism. Therefore, for every dollar of direct medical and pharmacy savings, you will gain another $3 in indirect savings.
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11. Shouldn’t we wait until we see what is going to happen with healthcare legislation?
Waiting for the government to act is almost always a bad idea. The longer that you wait, the more the health and productivity of your workforce erodes. Regardless of who pays for your employee’s healthcare, you need a health and productivity risk management program in place in order to maintain and improve your most valuable asset.
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12. Will my employees object?
The most successful companies sell health and productivity risk management as a benefit to their employees. Communication and education prior to the implementation of your program are key to your success and are all addressed in the ACBG Edge process. While it is natural for some employees to resist change, the success of your program evidenced by the testimonials of employees whose lives have been changed will soon win them over.
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13. What manpower does it take to run an effective employee health and productivity risk management program?
That depends on the number of employees that you have, however, the most successful programs have at least one dedicated employee managing the process for every 300 employees. Our Members each manage the process with slightly different staff to fit their needs. An advantage of Membership is that you can learn from our Members and incorporate the ideas that best fit you.
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14. What new responsibilities will I have after becoming a Member of ACBG?
>> Be one of the owners of an insurance company.
>> Appoint a representative of your company to serve on the ACBG board.
>> Board member attends 2 in-person board meetings a year, typically held in March and August.
>> Appoint company representatives to serve on at least 2 committees. Committees include Audit, Benefit Plan Design, Compensation & Benefits, Investment, and Wellness.
>> Share risk with other 1st Class Contractors.
>> Appoint or hire someone to run your employee health and productivity risk management program and understand that, depending on your number of employees, the position could be a full-time job.
>> Commit to follow a custom-designed, 3-Year-Track to a Champion Company.
>> Allow ACBG to conduct a cultural audit of your firm.
>> Empower your top management and supervisors to change their work environments for the better.
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15. Why do we need all the data?
The goal of an employee health and productivity risk management program is to maximize our human capital’s productivity, creativity, and ingenuity and to reduce risk. We define health as the presence of energy and vitality, rather than the absence of disease. Our strategy is to keep our healthy people healthy and to help those in the medium and high risk categories improve. By providing medical, pharmacy and workers’ compensation data feeds; we gain a complete picture of our total cost of healthcare. 85% of workers’ compensation costs are attributed to excess risks (people in the medium or high-risk categories)*. Benchmarking and monitoring risk factors in conjunction with workers’ compensation claims is a necessity, just as it is with medical and pharmacy claims. In addition to reducing medical, pharmacy and workers’ compensation costs, the reduction of risk factors within our population will also reduce the cost of disability, absenteeism, and presenteeism in our work force.
A small number of people drive the majority of costs each year. 5% of plan participants will account for 50% of our annual paid claims. The health status of our plan participants is always changing and the 5% of people creating 50% of our claims will change year after year. The Trend Management System (TMS) forecasts with 83% accuracy who will be our high cost participants 36 months in advance, creating time for us to mitigate the risk. The ability to identify a person’s changing health status well in advance of a major health event is a win/win strategy and the major value proposition of the TMS. The TMS does not focus on one singular risk, like obesity or high cholesterol; rather it identifies specific risk clusters that trigger high cost claims and delivers precisely targeted interventions. The TMS identifies four categories of risk:
Healthy (typically 10% of the population). These participants are considered low or no risk.
Behavior Risk (typically 20% of the population). These participants have behavioral risk factors such as smoking, alcohol consumption, safety belt use, etc.
Psychological Risk (typically 40% of the population). These participants have psychological risk factors such as stress, job satisfaction, physical activity, self-perceived health, etc.
Biometric Risk (typically 30% of the population). These participants have biometric risk factors such as blood pressure, cholesterol, BMI, etc.
A single risk factor may not be considered high risk unless it is combined with certain other risk factors. The TMS identifies these clusters through the analysis of Health Risk Assessments (HRA), biometric results and medical, pharmacy and workers’ compensation data. It then triggers one or more of the following interventions:
Personal Health Profile Report (All Participants). A 10-page comprehensive health report built from an individual’s HRA and biometric testing data. It compares the participants current health status to their prior health status, identifies their top 3 individual risks and provides education and recommendations for improvement.
Outbound Telephonic Health Coaching (All Participants). A Health Advisor will make outbound calls to the high-risk participants and provide telephonic counseling specific to their individual needs. Regardless of risk level, Utilization and Case managers make outbound calls to participants or their physicians, depending on the need. A participant’s medical claims might trigger a Utilization Manager to assist the member in obtaining more cost effective and streamlined treatment. A Case Manager will intervene on complicated cases and assist the participant in navigating through the healthcare system.
Inbound Telephonic Health Coaching (All Participants). Telephonic coaching is always available to all participants. The coaching center is staffed with over 200 experts in multiple different disciplines including nutritionists, behavioral health clinicians, exercise physiologists, health educators, registered nurses, and pharmacists. Health coaches work with employees to teach them how to prevent or manage chronic diseases. They are available for consult in the areas of nutrition, physical activity, preventive care, pre-diabetes, hypertension, high cholesterol and treatment decisions.
Online Health Coaching (All Participants). For participants with internet access, this offers structured lifestyle management programs and a wide variety of in depth educational resources created by some of the world best authorities on health and productivity.
Letters to Participants (Low and Medium Risk Participants). These letters introduce the health coaching program to the participant and provide recommendations for staying healthy.
24-Hour Nurse Line (All Participants). Participants have access to advice from a nurse 24/7. The nurse will help the participant determine if they need to go to a doctor, urgent care facility or an emergency room. They offer at-home remedies for lesser conditions and can help the participant find the closest in-network provider.
Well-Informed Letters (All Participants). The TMS identifies potential gaps in care through the analysis of medical and pharmacy claims data and biometric testing data. Gaps in care trigger letters that are sent to the participant, and in some cases, outbound telephonic health coaching. Examples of triggers include conflicting medications prescribed by different doctors, recommendations for alternative treatments and/or recommendations to seek medical advice. Well-Informed letters will explain common side effects of a medication, possible conflicting medications and potential conditions that are not being treated.
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16. How much risk of the other Members would we be assuming?
Each Member has 3 layers of risk, referred to as the "Contractor", "Pooled", and "Excess" layers. (See "Diagram of Risk Layers" under the "Purchase Insurance" tab at www.acbg.net) The Contractor Layer typically covers claims from $0 to $100,000 per unit per year. Each Member is responsible for the claims in their Contractor Layer and as a result, each Member is largely self-rated as respects losses in this layer. The Pooled Layer typically covers claims from $100,000 to $250,000. Claims in the Pooled Layer are shared among the Members, each Member is rated based on the risk that they present to the layer and the Company purchases aggregate protection, which limits the participants’ exposure in the layer. The Excess layer typically covers claims from $250,000 to $2,000,000 and the Company cedes 100% of this risk to a reinsurance company.
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17. How much capital needs to be contributed by a new participant?
A stock purchase of $75,000 is required along with a ten year subordinated debenture. The value of the debenture is dependent on the financial risk that the participant presents the Company and varies from a minimum of $0 to a maximum of an amount equal to 10% of the estimated total first year gross healthcare liability for the participant. In addition, each participant must purchase insurance coverages during the first three years; from the fourth to the sixth year, the participant has the option of purchasing insurance or paying a fee.
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18. Are profits distributed on an equitable basis?
The contractors are Class B shareholders and own an aggregate of 85% of the Company's equity account (the other 15% being owned by Steve Heussner, the Class A shareholder). Ownership of the 85% portion is prorated among the contractors on the basis of a formula that takes into account the following: (I) the net capital contributed; (ii) the net historical underwriting profits generated from that contractor's insurance business; (iii) the net historical investment income earned with respect to that contractor's insurance business; and (iv) a prorata portion of "pooled" underwriting and investment activities. In general, those contractors contributing the most profitable insurance business for the longest period of time receive the biggest share of the equity.
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19. How are the individual exposures of the participants recognized through underwriting?
A cornerstone of the Company's program is individual underwriting of each account. Each participant's premiums are a function of that participant's own past losses and operational risks.
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20. How are premiums developed?
Each Member’s participant’s actual experience for past losses and operational risks helps determine, to a significant degree, the amount of premium needed in the primary loss levels. Premiums for the "pooled" layers above the primary plans are based on each participant’s experience and on the historical experience of the group. The rating plan factors are established to produce an underwriting profit of 10% of premiums for the first six years of a shareholder's participation and 5% thereafter. Excess premiums are returned to the shareholder through annual retro returns or as profits to the shareholder's equity accounts (less the 15% profit credited to the Class A shareholder).
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21. Will our premiums be deductible as respects our income tax returns?
It is our intent that these premiums be deductible under current tax law. Our taxation counsel is available to provide each shareholder with a discussion of the tax law on this and other topics upon request.
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22. Will the Company provide adequate coverage?
To date, all insureds have been able to broaden their insurance protection by participating in the program.
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23. What types of coverages are provided?
The Company issues a Contractual Indemnity Liability Insurance Policy that indemnifies the contractor from the portion of their liability that is in excess of a pre-defined, unit-specific deductible, typically $100,000.
ACBG also issues a Contractual Indemnity Liability Insurance Policy that indemnifies the contractor from the portion of their liability that is in excess of an actuarially predetermined aggregate level.
The contractor pays all of their claims liability through their VEBA Trust, and the contractor is reimbursed if and when the attachment points are exceeded.
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24. Who manages and monitors operations of the Company?
A competent team has been put together utilizing the strengths of highly qualified support service firms. Cornerstones of the Company's management include the following: (a) the emphasis it places on contractor wellness and risk management programs; (b) the use of the Company's unique processes, The ACBG Edge and The Lean Health Insurance Advantage ; and (c) a unique equity program that is designed to reward the shareholder for profitable insurance business placed with the Company. Careful reporting is made to the Board of Directors of the Company.
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25. How do we dispose of our interest?
Investment in the Company is not a short-term commitment. Initially, participants must agree to place coverage in the Company for the first three years. For the second three-year period, coverage can be placed elsewhere by paying a maintenance fee of 2.5% of the average annual total healthcare liability for the prior three years. After six years, a participant may withdraw (after providing notice and complying with the other terms of the Byelaws) and receive the full value of its equity account, subject to a hold back to secure the participant’s debt to the Company. The Byelaws set out guidelines thereafter to govern the terms and conditions under which a participant can withdraw. Withdrawal on terms other than those approved in the Byelaws (i.e., an event of default) typically results in a 50% forfeiture of equity. All obligations of the participants to the Company must be settled upon withdrawal.
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26. How many participants will there ultimately be?
At the date of this booklet, the Company has approval to have up to 40 premium paying participants.
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27. Can the Company go broke?
Any company can go broke, however, on most of the business, the Company accepts a limited amount of risk, much of which is further limited by the Audit Committee, which enforces a reasonable underwriting discipline on the Company. The risk of insolvency is reduced by the Company’s reinsurance agreements by the demonstrated profitable 5 years of operations of the Company and by the approximately $4 million of consolidated shareholders' equity as of December 31, 2009.
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28. How will reserve funds be invested?
The Company maintains a very conservative investment policy and currently has the majority of its assets invested in CDs with a variety of banks and/or Merrill Lynch. The Investment Committee follows the Company’s investment policy and will makes recommendations on investment vehicles as needed.
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29. Do we have to purchase insurance from the Company and use Cigna as our network and third party administrator?
At present, you must purchase the contractual liability coverage outlined in Question #19 from the Company. You may, however, use any network and/or third party administrator, as long as a data feed can be established from the network/TPA to the University of Michigan’s Health Management Research Center.
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30. Do we have to place all of our ancillary benefits with the Company?
No, only the contractual liability coverage outlined in Question #19.
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31. Can I still use my local insurance agent?
Yes. Day-to-day service responsibilities and fee-based compensation are divided between the agent and the Company.
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32. What happens if I do not place my business in ACBG for a period longer than three years?
You automatically become a withdrawing shareholder at the end of the three years.
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33. Is the Company required to write insurance for each shareholder?
No, the Company may unilaterally cancel insurance coverage of a shareholder and its insured Members, and the shareholder becomes a withdrawing shareholder at the end of three years.
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34. How do I get started?
Contact our CEO, Steve Heussner: 214.420.7101 or steve@acbg.net