Smaller employers have historically been hesitant to self-fund their health plans because they commonly perceive it as suitable only for large companies. Done right, self-funding an employee health benefit plan can be a smart long-term strategy.
Is self-funding the right choice for a smaller business client? Brokers can reach an answer by understanding the options in the marketplace and knowing the questions to ask their clients.
1. Do you want to know how your claim dollars are being spent?
Self-funding offers a higher level of information transparency when it comes to health care utilization trends. Client-specific claim reports can help pinpoint exactly where health care dollars are being spent and the impact of any wellness programs. This information can help guide your clients' decisions when considering benefit changes, and it also helps identify the health and productivity programs that target the health needs of their employee population.
2. Do your plan design and funding options work together to help you manage costs and improve health?
A self-funded solution that includes strategies and programs to help reduce overall claims - such as health and wellness programs, disease management programs, consumer-driven health plans and care management for serious illnesses - can help your clients identify population health risks, design programs to their specific workforce's needs, and realize claims savings quickly and directly. With the cost of medical treatment escalating, these strategies are vital to control costs.
3. Do you have employees in different states, yet need to have one consistent plan?
Most self-funded health plans are not subject to state-mandated benefits. This allows an employer to offer the same coverage to employees in different states. In addition, because state-mandated benefits are not required, an employer can tailor a plan design beyond what most fully insured carriers have available "off the shelf." Also, self-funded health plans pay state taxes on stop-loss insurance premiums only, so premium taxes are lower.
4. How much in-house expertise and resources do you have to devote to benefits administration?
An integrated solution is a simpler option than many self-funded solutions that include a third-party administrator that processes the employer's health plan claims, a separate insurance company that issues stop-loss insurance and even another entity that arranges for a network of health care professionals who participate in the plan. An integrated program is where a single entity handles the claims administration, offers the stop-loss insurance and provides a proprietary network of contracted health care professionals with whom they've negotiated discounts. This integrated model can help your clients avoid coverage gaps caused by inconsistent or conflicting provisions in the medical plan documents and the stop-loss insurance policy.
5. Can you track claim expenses to avoid rate surprises?
With a fully-insured health plan, it can be as close as 30 to 60 days prior to the effective date when the insurer delivers a renewal. A self-funded health plan allows you and your client to see how the health plan is performing throughout the year. Armed with this information, it allows for better planning for potential pricing and benefit design changes.
6. What level of stop-loss are you comfortable with?
Stop-loss coverage is available at the individual level and aggregate level, and it's perhaps the most important component of a smaller employer's self-funded plan.
The cost of stop-loss insurance is a monthly premium. There are a variety of stop-loss thresholds from which to choose. Because individual stop-loss products can include various reimbursement cycles, it's smart to look for individual stop-loss products that reimburse the plan immediately when a stop loss claim occurs. Otherwise, your client is responsible for covering the full amount of any excess claims until they are reimbursed. Likewise, when reviewing aggregate stop-loss options, it is important to make sure the policy includes monthly accommodation that helps to protect a client's cash flow by ensuring claim liability is capped on a monthly and year-to-date basis.
The marketplace of services available to you and your clients has been changing, and many smaller employers are giving the idea of self-funding a fresh look. To ensure success, brokers should stay up-to-date on the options available; be knowledgeable about carriers' products, expertise and experience; and be ready for the conversation with clients.
Grimm is vice president of Cigna's Select Segment. He works directly with brokers in the design and administration of health and productivity programs for smaller employers with 50-250 employees.
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