Fall has officially arrived. The leaves are changing, the holidays are right around the corner, and HR professionals are entering one of the busiest times of the year: evaluating employee benefits programs.
Insurance carriers are probably already sending you quotes for the next plan year. According to the National Business Group on Health, chances are you’re looking at another 5% increase, just like we’ve experienced for the past 5 years. In order to contain costs, you may be looking at higher deductibles and/or changing your cost sharing ratio.
But, have you considered self-funding your plan?
Many employers believe that self-funding is only an option for larger companies with at least 250 employees, that the administrative burden is too much, that it could negatively impact employees’ provider coverage, or that the plan would be exposed to too much risk.
There are numerous misconceptions about self-funded plans. I know this all too well because I was overwhelmed with the contradicting opinions floating around out there.
In order to dispel some of those myths, I would like to share my own personal experience with self-funding.
Self-funding is too much work for employers: Myth
I must admit, as an HR department of one, the thought of taking on additional tasks related to plan administration seemed daunting. I wasn’t sure how to go about ensuring the plan met all the federal mandates, managing the plan, collecting co-pays and premiums, and paying claims.
Much to my relief, I discovered that there are Third-Party Administrators (TPAs) who work with self-funded employers. The TPA handles all of those day to day administrative tasks.
Self-funded plan benefits are insufficient: Myth
Benefits packages play a critical role in attracting and retaining top talent.
I was concerned that a self-funded plan wouldn’t measure up to a traditional plan. I thought that the “self” in self-funding meant that the employees would bear the burden of paying their own medical costs.
This is not the case.
Self-funded plans are designed much like traditional plans with structured co-pays, deductibles, co-insurance and out of pocket maximums.
I also worried that there wouldn’t be a provider network, that employees would have limited access to health care providers, and that their current providers may not accept our self-funded plan.
However, the TPA will have an established provider network, and can also navigate provider network contracts to add providers and ensure a broad network.
Self-funded plans should never be considered due to the inherent risk: Myth
With the rising cost of healthcare, claims can be costlier than anticipated and most major claims are unexpected.
One of the benefits of a self-funded plan is cost control, but I didn’t know how to budget for claims, or what would happen if there were unexpected high cost claims during the year.
This is where stop-loss insurance comes in.
Your TPA can help you purchase stop-loss insurance to reimburse you for claims that exceed a predetermined threshold. They can also analyze claims data to identify health issues that are driving your claims costs.
Using this claims information, they can help implement health and wellness education programs for members with chronic conditions such as diabetes, stroke, or cardiovascular disease. These program provide individualized, goal-oriented care and help reduce the risk of preventable medical conditions.
Not only can these programs lower claims exposure, but they can also improve the overall health and wellbeing of employees with chronic conditions.
Our Results
Since self-funding our plan in 2015, we have experienced significant cost savings on our employee healthcare benefits.
Last year, we were able to share these savings with our employees by lowering premiums and deductibles, while still providing the coverage that meets the needs of our employees.
I contribute our success to having the right partners in place to assist with plan administration, coordinate stop-loss insurance coverage, navigate provider network contracts, oversee claims review services, and our commitment to investing in disease management.
Jessica Tucker, PHR
