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Self-Funding 101 Martin Trussell, Acclaris, Inc.
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Self-Funding 101 Martin Trussell, Acclaris, Inc.
Topics:
Self-Funding – Why now?
Self-Funding – What is it?
What are the parts?
Plan design, stop loss insurance, networks, administration, etc.
ASO vs. TPA?
Self-funding – Why Now?
“Health insurers are predicting an increase in self-funded health insurance plans by U.S. employers in response to the Patient Protection and Affordable Care Act.”
Article in BenefitsPro, April 15, 2013
Self-funding – Why Now?
Study: Munich Health North America, a subsidiary of reinsurer Munich Re, found that employers are expected to increasingly do away with providing group health insurance to their employees and are expected to instead self-fund their plans.
Source: BenefitsPro
Self-funding – Why Now?
“The trend toward self-funding stems from employers’ desire to maintain a level of flexibility and control in the design and financing of their employees’ health benefits,” said Richard Phillips, president of Munich Health North America’s Reinsurance Division.
Source: BenefitsPro
Self-funding – Why Now?
Among the 326 industry executives surveyed, 82 percent said they have seen a growing level of interest among employers in self-funding their group health insurance plans over the past 12 months, with nearly one-third saying that interest has increased “significantly.”
Source: BenefitsPro
Self-funding – Why Now?
ERISA – No state mandated benefits, no state premium taxes.
PPACA requires group health plans (and, by extension, self-insured plans) to comply with some but not all private reforms.
Self-funding – Why Now?
PPACA Requirements Not Required of Self-funded groups:
Prohibits discrimination based on employee compensation – NR
Requires reporting of medical loss ratio and provision of rebates - NR
Annual rate review – NR
Adjusted community rating rules – NR
Guaranteed issue requirements – NR
Guaranteed renewability requirements – NR
Requires coverage for essential health benefits - NR
Source: Congressional Research service
Self-funding – Why Now?
PPACA Requirements Still Required of Self-funded groups:
Prohibits lifetime limits
Restricts annual limits
Restricts rescissions
Extends dependent coverage to age 26
Requires uniform explanation of plan benefits
Prohibits coverage exclusions for preexisting conditions
Limits out-of-pocket spending
Limits cost-sharing, waiting periods Source: Congressional Research service
Self-funding – Why Now?
The employer requirements under PPACA do not depend on the funding for an employer plan. In other words, the potential imposition of an employer penalty will not be contingent on whether the plan is self-insured or fully insured.
Source: Congressional Research service
Topics:
✔Self-Funding – Why now?
Self-Funding – What is it?
What are the parts?
Plan design, stop loss insurance, networks, administration, etc.
ASO vs. TPA?
Self-funding – What is it?
Employment-based coverage may either be purchased from an insurance carrier (fully insured health plan), or funded directly by the employer (self-insured health benefits).
In self-funded health care, the employer assumes the direct risk for payment of the claims for benefits.
The terms of eligibility and covered benefits are set forth in a plan document which includes provisions similar to those found in a typical group health insurance policy.
Self-funding – What is it?
Generally best for:
Larger employers (at least 150 employees)
Employers with good cash flow
Employers with “younger/healthier“ population
Employers with multi-state workforce
Employer who want to take an active role in benefit design
Topics:
✔Self-Funding – Why now?
✔Self-Funding – What is it?
What are the parts?
Plan design, stop loss insurance, networks, administration, etc.
ASO vs. TPA?
Self-funding – What are the parts?
Plan document (includes provisions similar to those found in a typical group health insurance policy)
Plan Administrator (Carrier or TPA)
Stop-loss insurance to mitigate financial risk of excessive claims
Aggregate and Specific
Provider Network
Others: Claims analytics, wellness programs, account-based plans
Self-funding – What are the parts?
Deeper dive:
Stop-loss insurance to mitigate financial risk of excessive claims
Aggregate – Protection against paid claims exceeding a total annual amount, usually 120% of “expected” claims.
Specific – Protection against an individual claim exceeding a certain level ($30K, $50K, or more).
Insurance carrier reimburses employer for claims paid in excess of stop-loss limits.
Self-funding – What are the parts?
Deeper dive:
Provider network:
Employer (or administrator) purchases access to a discounted preferred provider network in areas where they have employees.
Network could be free-standing PPO or a leased carrier network.
Self-funding – What are the parts?
Deeper dive:
Plan Administrator
A full-service benefits Third Party Administrator (TPA)
Carrier Administrative Services Only (ASO)
ASO Vs. TPA
ASO
Plan design may be limited
In-house Stop-loss insurance
Generally stronger networks
Limited reporting
Standard Customer Service Levels
TPA
Usually flexible plan designs
Shops Stop-loss market
Generally weaker networks
Usually better reporting
Emphasis on customer service
Questions?
