Ready... Set... Self-fund!
By Ron Wozny, Vice President of Marketing
It’s that time of year again. Of course, there’s football, tailgate parties and the changing autumn colors. It’s also time for employers to evaluate if their health program is running efficiently. For your employees, this is among the most important decisions you will make all year because of the financial and service impact to your members.
As employers across the country consider their options, more and more are considering self-funded plans. Historically, only larger employers, say over 1,000 employees, would consider self-funded plans because of the perceived financial risk involved. Today, many smaller employers, even some with fewer than 200 employees, are moving to a self-funded model.
This is a big decision, with many things to consider. To get you started, here are just a few things to think about when weighing the options.
- What are the benefits of self-funding? Wouldn’t it be better to use a fully funded plan from a carrier?
Working with a fully funded (insured) carrier may be the right choice for some employers. For others, there are many financial benefits at play. For instance, with fully funded plans, the carriers charge a flat monthly rate for each employee and do not release any surplus funds at the end of the year. This is money that could be going into your account, because when you self-insure, you only fund your bank account for the claims incurred during the plan year, minus any TPA ASO fees and Stop Loss costs for large claim reimbursement. You can also gain efficiencies by designing the benefit plan that best suits your population and industry needs. Otherwise, you’re limited to selecting from the carrier’s standard plan designs with little room for flexibility and probably paying for things you don’t need. Plus, there is savings from state premium taxes that carriers are charged for collected premiums. This doesn’t apply if you’re self-funded, which means more savings for you.
- Will I lose everything if my employees are older or we have a catastrophic medical claim?
With today’s aging population, increased claims can occur due to additional medical care or treatments. Also, nobody can predict when an accident or critical illness can occur at any age. For larger employers, this is less of a concern as they would likely have reserves to cover these claims, but for smaller employers, these claims could be devastating. “Stop-loss insurance” exists to protect employers should claims exceed a certain individual or aggregate dollar amount. When self-funding, be sure to talk to your TPA about stop-loss coverage options and evaluate what is best for you.
- Do TPAs give me everything I need to run my health plan?
Administratively, most TPAs will give you the fundamental basics need to operate your plan. But you may find yourself looking for other vendors to fill any gaps they don’t provide, such as an integrated pharmacy benefit administration solution. Additionally, there are many other services and solutions that can help you reduce your healthcare costs. Things like reference- based pricing, care management, pharmacy benefit management and PPO networks. When reviewing TPAs, ask about their other solutions and ways that they can help you save money. This is what sets some TPAs (like HealthSmart) apart from other, smaller TPAs. By streamlining your benefit solutions through a single, one-stop TPA, your benefit administration becomes much more efficient and, frankly, easier.
The first two items in this list are things other TPAs and brokers talk about all the time. What they don’t talk about much is item #3. How do you further move the needle on cost savings? By getting creative, that’s how.
As an example, HealthSmart offers a bundled pricing solution called
MyDecision. This means all services for an elective, non-emergent surgery or procedure are included at a single price. Does it work? We recently had a member who had hip replacement surgery. The normal amount that would have been paid to all involved would have been around $40,000. With MyDecision, it was about HALF. With ZERO out-of-pocket for the member.
Another example is our
Care Management solutions. We have a client who has three patients in end-stage renal failure. If you didn’t know, dialysis is extremely expensive, often more than $1 million per year per patient. Our
dialysis program saved the employer more than $3 million per year.
These are just two examples of how creative thinking and innovative solutions can save amazing amounts of money for self-funded plans. We have many more to share.
If you’re an employer, talk to your broker about whether self-funding is right for you, or you can contact us directly. It may surprise you how self-funding can significantly improve your benefits program for you and your employees.