As a small- to medium-sized employer, you have many options when it comes to choosing your employer-sponsored health plan. Traditionally, the most common choice has been a fully-insured plan where you pay premiums to an insurance company who in turn provides you access to benefits.
Today, employers are looking for alternative solutions to help them control the escalating cost to provide group health benefits to their employees. This includes taking a fresh look at an old solution. Self-insurance (also known as self-funding), which has been around since the 1970s, has experienced renewed interest since the dawn of the Affordable Care Act (ACA), particularly due to the rising healthcare premium costs associated with ACA plans. Between 2015 and 2016, the Employee Benefit Research Institute reported an increase in small-size companies with a self-insurance program rising from 14.2% to 17.4%.
Just curious or even considering jumping on the self-insured bandwagon? Here are some things to consider:
Being self-insured will give you access to claims and utilization data. This transparency gives you the opportunity to understand the overall health of your entire employee population. Note that you will not know a specific individual’s health, but rather a high level summary of your entire group’s data.
It bears restating – being self-insured means you own your claims and utilization data, although each carrier and Third-Party Administrator (TPA) will vary in how this is reported to you. Be sure to select a company and plan that is responsive to your particular needs.
I’m going to borrow from a web-spinning superhero movie quote and say, “With great data comes great responsibility.” So, it is not a direct quote, but there certainly is a marvelous opportunity for the employer to impact the health of employees. For example, this could include creating wellness incentives like taking biometric screenings in order for the employee to qualify for a discount on healthcare premiums. You may also create fun wellness activities like walk or run events to create an environment of healthy living among your employees. There is a multitude of wellness program options from carriers as well as standalone vendors that will aid in positively impacting the health of your employees.
Some employers in the fully-insured market may have some experience in changing certain elements of their plan design like changing co-payments or coinsurance amounts. These changes are extremely limited as ultimately the insurance carrier will outline what options are made available. Being self-insured will give you complete control to design the program from top to bottom. It is important to note that though you have freedom, you still must design a program that meets the ACA guidelines.
Are you looking to save dollars or improve your employees’ health and culture at your company? Or both? Implementing a self-insurance program will typically not immediately yield the desired results. This will take time. Be methodical, intentional, and most importantly be patient when deploying a self-insurance program. It may take several years to gather pertinent data and deploy appropriate solutions to improve employee health and drive overall costs down.
Complying with regulations is not new as it relates to managing an employee benefit program, but you will want to focus your efforts on certain aspects when deploying a self-insurance program. These requirements may range from how you handle personal health information (PHI) to what you report to the government (ERISA). To better understand these requirements, it is paramount to have legal counsel as well as a trusted benefit consultants as part of your core team of partners.
Deploying a self-insurance program will open you up to a greater amount of risk. One option to mitigate this risk is to implement a layer of insurance called stop-loss. This insurance coverage is designed to cover losses that exceed an unexpected dollar amount in claims. For example, if the threshold for an individual’s claims is $50,000, the employer will be responsible to pay claims up to $50,000. Once that threshold is met, then the insurance company will pay any claims beyond the $50,000.
In summary, there are many things to consider in exploring the self-insurance option. There are even options to go partially self-funded where employers can receive many of the benefits of being self-insured while tempering some of the financial risks. I will discuss these options in greater detail in a separate article.
For now, it would be wise to define your road-map to go self-insured. With the opportunity to save a significant amount of healthcare dollars comes the access to a wide array of data to help improve the overall health of your employees. Thus, as an employer, you are now armed with a better ability to spend your healthcare dollars where it makes the most positive impact on you and your employees.
Need help deciding what insurance policy is best for you and your employees? Contact Scott Borden for a personalized consultation! Reach him at (816) 360-7915, or email him at sborden@lewer.com.
