A common complaint of having a fully insured medical plan is the lack of flexibility. Often, a plan sponsor will feel like they are “at the mercy” of the insurer. With the advent of ACA and tightening of insurers’ belts, plan sponsors have felt on the losing end of coverage decisions, plan design flexibility and lack of control of ever-increasing costs. Moving to a self-funded insurance environment puts much of that control back in a plan sponsor’s world, and the cost savings only sweetens the deal.
If you’re sponsoring a self-insured medical plan, you are essentially your own insurance company backing claims with your reserves and stop loss insurance. You have the latitude to make decisions without getting the approval of an insurance carrier.
For instance, if an employee’s claim is denied, the appeal will go through the insurance provider in a fully-insured world. If the employer sponsors a self-funded insurance plan, the employer will decide if that claim is covered and can tweak the plan to allow that claim and future claims. This can add “common sense” back into an employer plan.
Heightened flexibility is only one of the reasons why a growing number of companies are taking the self-funded insurance route. It represents a lot more freedom for the employer and a much better employee experience as well. And the opportunity to control costs is no small matter either.
The move toward self-funded insurance – where firms fund and manage their own healthcare plans – has been years in the making. While initially viewed as a big business strategy, is increasingly attractive and attainable for smaller organizations. Since 1996, EBRI reported last year, the portion of U.S. employers self-insuring at least one health plan has risen to 80 percent for firms with 500-plus employees; declined slightly to 30 percent of those with 100 to 499 workers; and grown to 14 percent among those with fewer than 100.
There are distinct benefits to self-funded insurance plans.
- Focused Options -- When it comes to flexibility an employer can provide customized options to respond to its specific workplace demographics. Plans appealing to singles, families, those just starting out and those towards the end of their careers.
- Financial Advantages -- There are financial advantages, too. Profits resulting from a group’s good health and, thus, lower-than-predicted utilization, go back to the company. Cash flow can improve as reserves previously held by the insurer against pending claims are now under the employer’s control. A self-funded plan avoids many state-mandated provisions and premium taxes. It also potentially reduces administrative fees.
Whether self-funding is right for your organization comes down a variety of factors, not the least of which is your company’s temperament and appetite for risk. And, yes, there is risk in the form of claims costs by enrolled members. You take those on, and they can be hard to predict. But they can be managed.
Here’s where your partnership with and the resources of your HUB broker comes into play. A HUB advisor can guide you through the process from start to finish. From exploring your organization’s appetite for risk and learning how they can be offset to understanding the administrative responsibilities and developing predictive claims scenarios, a HUB advisor can guide you all along the way. Ultimately, HUB will help you realize the shared goal of building a successful self-funding program for your organization and your employees.