Today, faced with rising premiums, employers are moving away from more traditional fully-insured plans to self-funded insurance.
For many employers, there can be huge benefits to switching to a self-funded insurance plan. So, what makes self-funded insurance such a good investment? Let’s start at the very beginning and look at what a self-funded group health plan is.
At a high-level, a Self-Funded Group Health Plan (or Self-Funded Insurance Plan) is where an employer is financially responsible for healthcare claims incurred by employees and is responsible for providing employee health care benefits.
There is a large amount of risk with this kind of plan, as employers are responsible for paying for claims. While fully-funded insurance plans are more expensive, they’re less volatile, charging a fixed premium to employers. A self-funded insurance plan can include medical, dental, vision, prescription medications and workers’ compensation. The costs incurred can vary depending on the use of the health services.
To successfully create and manage a comprehensive healthcare plan, migrate associated risk, and ensure the insurance plan meet the needs of employees, self-insured organizations will employ other entities to help them with their plan:
To some, this may sound like a lot of cooks in the kitchen, but in reality, you need this team for self-insured success. Here’s an example on how all these moving pieces work together:
Under a Fully-Funded Insurance Plan:
Under a Self-Funded Insurance Plan:
The specific TPA costs, stop-loss premiums, and potential savings opportunities associated with a self-funded insurance plan are all subject to how you and your company create your insurance policy. To maneuver the different healthcare options and put together a comprehensive plan for your employee population, it could be very strategic to also consult a health benefits broker.
The most fundamental difference between fully- and self-funded insurance plans comes down to one question: “who is going to assume the risk?” In this case, risk pertains to insurance risk, or who is going to pay the hospital when an employee needs to go to the doctor? A fully-funded insurance plan is structured so that an employer purchases health coverage from an insurance carrier for a per-member premium. While relatively stable, these premiums can fluctuate based on the size of the company, employee health, and healthcare usage.
Companies are stepping away from a one size fits all, fully-funded insurance plan to take control of their healthcare insurance and fine tune their offerings to the needs of their employee population. Employers are also making the switch to a self-funded insurance plan to:
Self-funded insurance plans allow employers to control costs, understand where their spend on healthcare is going, and control the design of their healthcare plan and benefits offerings. Employers making the change to self-funded insurance plans are taking it one- step further and investing in technologies to set their self-funded insurance plan up for success.
Organizations that are looking to switch to a self-funded insurance plan to build health benefits packages to fit the needs of their population and control healthcare costs are setting their self-funded insurance plan up for success by:
Creating a Plan that Fits their Employee Population – Employers looking to set their plan up for success are opening up a conversation with a benefits broker to understand the different plans available was well as how their employee population size, risk tolerance, and other variables that could impact their healthcare plan.
Establishing Plan Administration – Employers are doing their homework and looking at all the available Third Party Administrators (TPAs) to determine which one is the best fit to oversee the claims processing, customer service, and administration of their self-funded insurance plan.
Integrating Health Analytics and Data Management – By leveraging a healthcare analytics solution, employers can tailor their healthcare plan to their specific workforce, identify and engage high-risk employees, and see the breakdown of their specific spend on healthcare.