Leveling the Self-Funding Field

The article below, titled Leveling the self-funded field, written by Robert Bull, was originally published by Employee Benefit Adviser on July 18, 2017.

Technology is changing every aspect of the way businesses operate — and that includes health plan self-funding.

It used to be that self-funding was limited to only the largest companies that could afford the manpower to either administer their own plans or develop their own proprietary administrative software. Today, new data technologies are leveling the playing field, making it affordable for virtually all employers to self-fund.

For too long HR teams have shied away from self-funding due to the perceived administrative burden. But technology has removed this barrier, making it easier to track eligibility and generate billing information. What used to be a painstaking manual process has been automated, and HR teams at self-funded companies can now provide richer benefits at a lower price. A good healthcare plan goes miles in attracting and keeping quality employees — and ensuring that they’re productive by minimizing absenteeism due to a lack of care for either themselves or their family members.

self-funding'Here’s what to look for when shopping for a top-notch self-funding solution:

1. The ability to consolidate information and manage all healthcare-related data from a single system. Most employers deal with multiple service providers — stop loss, vision, pharmacy, dental, medical, wellness, and third-party administrators, just to name a few. But they should insist that all of the relevant data is consolidated onto one system. For one thing, it’s much simpler and less time consuming to administer and pay all of their providers from a single source. For another, it takes much less time and effort to master a single application — as opposed to having to learn the ins and outs of each provider’s software.

When the data from multiple vendors are integrated onto a single platform, the time-consuming process of having to reconcile across providers every month is eliminated. The plan’s administrator can instantly determine counts and claims. Likewise, multiple payment processes can be eliminated in favor of a single, consistent payment method.

Best of all, HR can take all this data, which reflects employee behavior and everything related to treatment, and use it for predictive modeling. With that level of insight, the employer can develop a plan that truly meets its — and its employees — needs.

2. Data transparency. For an employer to take on the added risk of self-funding, it needs to be able to closely examine its data and determine the underlying trends. Without pricing and transaction transparency, it is impossible to perform a meaningful cost analysis.

As opposed to fully-insured plans, where the data is the property of the insurance carrier, with a self-funded plan the employer owns the plan’s data. And once the employer can access its claims, demographic and pricing information, it can make accurate decisions about what is best for the company and its employees.

The data can also be used to influence employee behavior. By educating a workforce about those behaviors that are wasteful and ineffective, the employer can reap significant savings for itself and its employees. And by analyzing the response rate to different messages and campaigns, HR can then determine what incentives would be useful to obtain even greater compliance.

3. Real-time data access. It’s not enough to have healthcare plan data; it needs to be timely or its utility is diminished. The best way for employers to be proactive is for them to be able to see what is happening with claims and cash flow on a monthly, weekly or even a daily basis. At a minimum, the employer should review its data at least quarterly. And the larger the employer, the greater the number of employees and claims, the more frequently the data needs to be examined.

Three years ago, it would have taken three weeks to scrub a mid-size employer’s claims data. Now it can take just two hours.

4. Safeguards. Data is power. That’s why an employer wants to ensure that only authorized personnel have access to healthcare plan data and analytics. There are legal and privacy considerations as well. That’s why it’s crucial to have robust security that maintains an audit trail of who touches what data and when. In case of an error or a breach, the event can be traced back to the people involved at the moment where it occurred.

Self-funding will continue to be transformed by technology. Cloud-based software is making it possible for ever smaller employers to implement and administer self-funded plans. Embracing and utilizing these tools can lead to lower premiums, greater access to health care and reduced costs for employer and employee alike.

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House Passes Bill to Protect Access to Affordable Health Care Options

Press Release from Education and the Workforce Committee Chairwomen Virginia Foxx on April 5, 2017.

The House today passed the Self-Insurance Protection Act (H.R. 1304), legislation that would protect access to affordable health care options for workers and families. Introduced by Rep. Phil Roe (R-TN), the legislation would reaffirm long-standing policies to ensure workers can continue to receive flexible, affordable health care coverage through self-insured plans. The bill passed by a bipartisan vote of 400 to 16.

“By protecting access to self-insurance, we can help ensure employers have the tools they need to control health care costs for working families,” Rep. Roe said. “Millions of Americans rely on flexible self-insured plans and the benefits they provide. Federal bureaucrats should never have the opportunity to limit or threaten this popular health care option. This legislation prevents bureaucratic overreach and represents an important step toward promoting choice in health care.”

“This legislation provides certainty for working families who depend on self-insured health care plans,” Chairwoman Virginia Foxx (R-NC) said. “Workers and employers are already facing limited choices in health care, and the least we can do is preserve the choices they still have. I want to thank Representative Roe for championing this commonsense bill. While there’s more we can and should do to ensure access to high-quality, affordable health care coverage, this bill is a positive step for workers and their families.”

BACKGROUND: To ensure workers and employers continue to have access to affordable, flexible health plans through self-insurance, Rep. Phil Roe (R-TN) introduced the Self-Insurance Protection Act (H.R. 1304). The legislation would amend the Employee Retirement Income Security Act, the Public Health Service Act, and the Internal Revenue Code to clarify that federal regulators cannot redefine stop-loss insurance as traditional health insurance. H.R. 1304 would preserve self-insurance and:

  • Reaffirm long-standing policies. Stop-loss insurance is not health insurance, and it has never been considered health insurance under federal law. H.R. 1304 would reaffirm this long-standing policy.
  • Protect access to affordable health care coverage. By preserving self-insurance, workers and employers will continue to benefit from a health care plan model that has proven to lower costs and provide greater flexibility.
  • Prevent bureaucratic overreach. Clarifying that regulators cannot redefine stop-loss insurance would prevent future administrations from limiting a popular health care option for workers and employers.

For a copy of the bill, click here.

For a fact sheet on the bill, click here.

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State of Self-Funding State Benefit Plans

The article below is from International Foundation of Employee Benefit Plans, written by Teri Dougherty

Governor Scott Walker recently proposed self-funding Wisconsin’s $1.5 billion health insurance program for 250,000 state and local government workers and their dependents. For now, it is a proposal that is being heavily debated in the Wisconsin State Legislatures Joint Finance Committee. If self-insurance contracts are approved by May 1, 2017, a new self-funding arrangement could go into effect January 1, 2018.

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Image Source: www.ifebp.org

To self-fund or fully insure is mostly a question of who will take on the financial risk of paying claims for covered benefits. Here’s a closer look at the many considerations involved, using Wisconsin as an example.

Self-funding isn’t an all-or-nothing option. According to the National Conference of State Legislatures (NCSL), 46 of the 50 states self-fund at least one health benefit plan. Because Wisconsin currently self-funds three benefit plans, Wisconsin is considered a self-funding state by NCSL. Currently less than 30 states completely self-fund their health insurance programs.

Why self-fund some benefits and not others?

The state of Wisconsin is currently self-funding, or assuming the risk for their pharmacy, vision and wellness benefits. At the same time, the state pays health insurance premiums to 17 health maintenance organizations (HMOs) for fully insured medical coverage. A third option is to partially self-fund, in which the state/employer complements its self-funded program by purchasing stop-loss insurance.  Stop-loss insurance provides financial protection only if self-funded claims exceed a specified dollar amount within a specified period.

John C. Garner, in his book Self-Funding Health Benefit Plans, describes how state-sponsored self-funded plans may be structured:

  • Creation. Before a public employee plan may be self-funded, either enabling legislation or an opinion of the states attorney general is usually required.
  • Plan choice. Most state plans are multiple option plans, whereby employees are offered more than one health plan.
  • Participation. Most state plans permit other government entities within the state to become participating members, such as:
    • Independent state agencies
    • Counties
    • Cities, towns and municipalities
    • Principalities
    • Public universities
    • Water districts
  • The plans are usually funded as a general asset plan. Since public employers are tax-exempt, no trust is needed. Stop-loss agreements are typical with these plans.
  • Governance. Self-funded plans are usually managed as soundly as the political environment will permit. A board or committee that includes employee representatives typically governs the plan. With substantial employee representation, the need for a claims buffer may be greater for a public plan than for a private plan.
  • Administration of state plans (e.g., claims, consulting, risk management, utilization review, disease management and prescription drug cards) is generally provided by outside vendors—just like most other self-funded single employer plans.
  • Regulation. Public employee plans are not subject to ERISA, hence they do not have to meet federal reporting and disclosure requirements. Since they do not have ERISA preemption, the plans must meet any applicable state rules and regulations.

The Wisconsin debate involves multiple considerations, including how the elimination of multiple fully insured health plans options may affect the market and worker choice. The Legislature’s Joint Finance Committee is expected to consider the self-funding issue in April or May, 2017.  Will there be a shift in Wisconsin to self-insurance for the state workers’ health plan? How might that shift impact the state’s next budget, health care market and economy? The International Foundation, residing in the great state of Wisconsin, will stay tuned.

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More Move to Self-Funding

self-fundingThe Employee Benefit Research Institute reports that nearly 20% of mid-sized employers made the jump to self-insurance from 2013 to 2015. A major attraction is the availability of data and analytics, enabling the employer to learn how healthcare dollars are being spent. A growing number of employers are using this data to incentivize employees who lower claim costs by choosing more efficient hospitals or freestanding imaging centers when tests such as an MRI are needed.

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Small Groups Can Combat Rising Healthcare Premiums with Level Funding

The rising cost of employee healthcare has more small employer groups choosing level funding over their traditional fully-insured health plans. What are the advantages of this option for your small business?

Cost Control and Opportunity for Savings

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Level funding is a form of partial self-funding that enables the employer to budget for monthly expenses while enjoying the financial advantages that larger organizations have enjoyed for years. With level funding, the employer pays a set amount each month to cover fixed costs as well as anticipated claim costs. Stop loss insurance funds claims that exceed the employers funding limit. If claims are below the funding limit, the surplus remains in the employer’s claim fund.

Other Advantages of Level Funding Include:

  • Easy to Operate
  • High Performance PPO Networks
  • Expert Administration
  • And More…

Level Funding with DG/25+

dgb-minutemanDiversified Group’s DG/25+ is a level funded health plan that offers flexibility and cost control for employers in Massachusetts and New Hampshire. This plan operates very much like a fully-insured health plan. Employers of 25 or more can establish a monthly health plan budge, while still enjoying the economic advantages of self-funding.

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Effective TPAs Contribute to Self-Funding Success

Article as seen in HM Stop Loss News November 2016

One of the most important success factors in self-funding is the service provided by the third party administrator (TPA). Since most employers do not have the expertise or the time to handle the day-to-day management of their health benefits programs, contracting a TPA for the administration of their plans is essential to achieving strong results. HM Insurance Group believes a successful relationship with the TPA is important to both the self-funded employer and the Stop Loss carrier.

Most standard TPA services include adjudicating claims, determining eligibility, communicating important information with plan members, creating forms, providing customer service and working with the Stop Loss carrier on catastrophic claim communication and financial reimbursement. There also are additional modern services that many TPAs provide that exceed these basic services. It is important to identify the key differences in administrative services and claims management approaches that individual TPAs possess in order to evaluate their overall contribution to a successful self-funding experience.

During our more than 30 years in the industry, HM Insurance Group has identified certain practices and approaches taken by effective TPAs that truly set them apart in managing benefits programs. This information should be considered only as a guide.

Key areas where superiority can be noted are as follows: 

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Self-Funding Employee Healthcare Plans is on the Rise

Several studies show an increase in the number of companies choosing self-insurance as well as an expectation that this trend will continue.

“Between 2013 and 2015, the proportion of midsized companies with 100 to 499 employees that were self-insured increased 19%, to 30%. The percentage of small firms with fewer than 100 employees that self-funded their health plans grew 7%, to 14%.”

This increase was expected with the introduction of the Affordable Care Act. In some cases, the law proposed requirements on health plans that do not apply to self-funded plans, making it an appealing solution. To read more about the rewards and risks small to large sized businesses weigh when deciding to self-insure click here.

It also appears that this rise in self-funded health plans over fully insured is going to continue. According to the Benefits Strategy & Benchmarking Survey, “the trend of switching from fully insured to self-insured is expected to grow by 35% in the next two years, from 28% to 38%.” There are several factors driving this continued trend. Employers are searching for savings in a world where healthcare costs and specialty drug costs are rising out of control. And, the ability to have access to health plan data, and services like telemedicine are very valuable added benefits.

To read why more and more companies are expected to continue to choose self-funding click here.

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