Understanding the Basics of Self- funded Health Plans

Understanding the Basics of Self-Funded Health PlansSELD-FUNDING 101: Understanding the Trend

In recent years, the need to curtail healthcare spending has given rise to an increasingly popular method of insuring employees—the self-funded health plan.

© Healthgram, Inc. 2015


Self-Funded Health Plan

Fully Insured Health Plan

A fully insured plan involves the employer paying a set premium to an insurance company to cover the costs of care. The yearly premium rates are a fixed charge that are based off the number enrolled in the plan each month.

A self-funded plan allows the employer to set the premium rates based off of the overall claim history of the group and adjust the plan in ways they see it working best for their members.

How a Self-Funded Health Plan Works

Instead of paying premiums to traditional health insurance companies, employers will fund their own plans—either partially or fully— and accept the responsibility for payment of any healthcare expenses incurred by enrollees.


Employers usually reach out to consultants or third-party administrators (TPAs) for assistance in designing plans that meet the needs of their employee populations.




TPAs help employers to:

• Create customized health benefit plan

documents

• Select appropriate provider networks

• Determine the level of stop-loss coverage

needed

• Administer the plans © Healthgram, Inc. 2015

It is important to select a TPA that is able to coordinate all of these steps while having your best interests at

heart.


Benefits of Self-funded Health Plans

• Increase in cash flow

• Tax benefits

• Transparency in data

• Flexibility in the plan

• Reduced administration costs


Benefits of Self-funded Plans

Self-funding allows smaller and midsized business to be much more flexible in the benefits they offer their employees, crafting plans that meet the needs of specific workplace populations.


This flexibility can control costs by encouraging healthy behaviors and

discouraging inappropriate healthcare utilization.



Population management strategies such as smoking cessation or weight loss programs can be implemented easily with greater involvement at the company level. © Healthgram, Inc. 2015


High-value services such as preventive care and medication adherence regimens give employers more control of positive outcomes while increasing workers’ quality of life and decreasing costs. © Healthgram, Inc. 2015

The process should be completely transparent to you as the employer,

with the focus on returning control into your hands.


Lower Costs with Self-funded Plans

Plan administration costs are significantly lower—typically between 3% to 5% for a TPA—than those associated with a fully insured plan, which the International Foundation of Employee Benefit Plans (IFEBP) reports range from 15% to 20%.


Self-funded companies can also avoid state premium taxes—typically 1.5% to 3.5% depending on the state—and costly mandates on insurers’ plans, which can add between 5% to 7% to plan costs.


Understanding the Risks

Self-funding most often refers to partially self-funding, meaning that an insurance company (reinsurance) is still involved covering the majority of the risk. © Healthgram, Inc. 2015


TPAs help employers determine the level of stop-loss coverage provided by a reinsurance carrier they need to cover extremely large claims based on their risk tolerance and claim history.



Reinsurance carriers have adapted to the need of small and mid-sized employers by offering special provisions that further address the perceived risk of a self-funded arrangement.



Maximum cost can also seem to be a risk of self-funding. When an employer is faced with high medical claim costs within one year, the value, not the risks, of self-funding is most transparent. Access to information and data on the drivers of medical cost and flexible solutions are critical advantages of self-funding.


A fully insured renewal after a high-cost year will offer a huge risk of double-digit rate increases, not solutions.



All these factors, as well as consistent results and proven case studies in almost every industry and every employer size show that risk is mitigated by the strategies and value imparted by an experienced and proven health plan administration.


In a 2011 survey of employer-sponsored health benefits, 60% of U.S. workers are insured by self-funded or partially self-

funded plans.

Survey conducted by the Kaiser Family Foundation and the Health Research & Educational Trust.


http://kaiserfamilyfoundation.files.wordpress.com/2013/04/8225.pdf

Who Chooses to Self-Fund?

Most employers can benefit from switching from a fully insured to a self-funded model. These benefits were thought to be reserved for only large companies, but that’s no longer the case.


http://www.healthgram.com/blog/post.cfm/self-funding-puts-small-and-midsized-companies-in-control

Who Chooses to Self-Fund?

Small and mid-sized employers with as few as 50 employees are reaping the rewards in the form of lower costs and greater control over their plans.


For more information about self-funding and how Healthgram can help your company discover ways to cut costs, contact us here.


http://www.healthgram.com/quote.cfm



Read the full blog post

and learn more at healthgram.com/blog

http://healthgram.com/blog/post.cfm/understanding-the-basics-of-self-funded-health-plans



Date post:	14-Aug-2015
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Understanding the Basics of Self- funded Health Plans

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