With so much confusion and controversy surrounding the implementation of the Affordable Care Act, you may wonder how to best serve your employees while keeping your healthcare expenditures reasonable. Self-funded services may be the answer.
How can self-funded plans benefit your company?
Self-funded services provide two big advantages:
- They give employers of all sizes more creative ways to control their healthcare costs.
- They provide flexibility that traditional programs do not.
Instead of paying the fixed costs of the bronze, silver, gold and platinum plans offered by most insurance carriers on the exchange model, self-funded services allow your business to pay lower fixed costs associated with administrative fees and stop-loss premiums. Your business then pays only the claim costs incurred by enrolled members, which will vary from month to month.
Self-funding allows your business to invest its money into its employees instead of into an insurance company. Your business will avoid paying for claim reserves, the insurance company’s administrative costs, profit margin, risk charges, premium taxes, and a contingency margin, which can save you up anywhere from 10 to 30 percent.
Self-funding allows you to customize a health benefit plan specific to your employees’ needs.
For example, you can ask your employees to fill out anonymous surveys that provide information like health histories, family patterns of disease, and lifestyle choices such as smoking. You can then use that information to design and promote wellness programs, which in turn could lower your future costs by decreasing your risk.
Why Stop-Loss Insurance is Crucial
While your business is not required to have stop-loss insurance when using self-funded services, it’s highly advisable.
Stop-loss insurance provides your business with protection against inordinately high claims. Your business is only be responsible to the stop-loss limit, after which a reinsurance carrier would fund the balance of the claim.
For example, stop-loss insurance helps to protect you against the massive expenditures associated with catastrophic medical events, such as severe trauma or the need for an organ transplant or neonatal intensive care. Stop-loss insurance pays your employees’ medical bills after your business has paid a certain predetermined amount.
Some stop-loss policies will also protect your business against high claims by any one employee or family member. Other policies protect you against an unexpectedly large amount in total claims.
How Self-Funded Services Can Benefit Smaller Companies
Self-insuring has traditionally been more popular with companies of 5,000 or more employees, but smaller companies can benefit, too.
Bill Brothers, the CEO of Premier Consulting Associates explains that when the Affordable Care Act goes into effect in January 2016, all companies with one to 100 employees offering traditional health insurance will be put together with other smaller companies into community pools. These companies will be given the same type of expensive group insurance plans— bronze, silver, gold and platinum—through the Small Business Health Options Program and will have to conform to the requirements of the Affordable Care Act.
Switching to self-funded services will exempt them from some of the ACA’s restrictions, give them the flexibility to tailor health care benefits to meet their employees’ needs while maintaining more control over health care expenditures. If health care costs are low in a particular month, the employer keeps the savings.
How to Transition to Self-Funded Services—Easily
With all of the background work that goes into designing and administering a self-funded program, many companies turn to consulting firms that specialize in employee benefits.
According to Brothers, one of Premier’s mandates is to facilitate the transition so that “there is very little change, or that it’s as transparent to them as possible, (with) maybe nothing more than an ID card change.” How?
An experienced consulting firm like Premier will sit down with you to review your business’s current plan and employee needs, while simultaneously identifying opportunities and ways that your company can save money.
- Premier’s team will help you analyze the claims that have been paid versus the premiums, then explain the additional charges that may be involved with the Affordable Care Act and what you do have to pay, versus what you don’t have to pay.
- Premier’s experts will evaluate participating providers and facilities and see where you can save money by possibly switching vendors or requesting discounts.
- Premier will work with your human resource administrators to create a complete step-by-step plan for implementation.
What About the ACA and Other Legislation?
Brothers reports that Premier subscribes to legislative briefs that are shared with clients on a monthly basis. Premier employs an internal compliance officer that stays up-to-date with all state and federal legislative laws and regulations, and partners with healthcare compliance lawyers and other external officers who ensure that they are running their programs correctly.
Self-insurance can be a viable option for employers of all sizes.
By analyzing claims, cash flow, administrative capabilities and coverage goals, you can determine whether the switch to self-funding makes sense. If you have questions or would like to discuss assistance in evaluating whether self-funded services are right for you, please call or contact Premier Consulting Associates.