Economies of Scale for Small Businesses

dgb-embIn late June, the Department of Labor introduced final rules on Association Health Plans (AHP), which will allow bonafide associations to offer healthcare plans to member companies. While we had hoped for a different approach to regulating these plans, association health plans will be regulated by states as MEWAs.

According to the final rules, an association that wants to establish a healthcare plan must already exist for another purpose. In other words, an association cannot be formed for the exclusive purpose of offering healthcare plans to its members. Another stipulation is that new self-funded association health plans cannot be established until April 1, 2019.

Association Health Plans will be exempt from the federal mandate on essential health benefits, but will remain consistent with popular Obamacare rules such as coverage of preexisting conditions and bans on lifetime limits.

While reserve requirements will vary from state to state, we expect that these plans will be quite costly to establish and closely monitored by state regulators. Nonetheless, for large associations with significant cash reserves, we expect this option to make it possible for thousands of small businesses to lower their cost of employee health benefits.

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3 reasons self-funding is a great option for smaller companies

This article was published on September 10, 2018 on BenefitsPro, written by Darick Bradford.

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Source: BenefitsPro

“Wait, what’s a self-funded plan again? And why does it make sense for my clients?”

These are questions I hear from brokers all the time. And I get it. Self-funding can be complex. But it’s time to get smarter about self-funded health benefit plan designs as this type of product could be a game-changer for your smaller clients.

Let’s start with the basics. What is a self-funded plan? Self-funding is an arrangement where an employer sponsors a self-funded health benefit plan and is financially responsible for employee covered claims up to a certain dollar amount. Covered claims in excess of this dollar amount are reimbursed to the employer through stop-loss insurance.

Larger organizations have used self-funding for years as a way to save costs, but more recently we’re also seeing smaller businesses offering self-funded health benefit plans to their employees.

The numbers back it up. Between 2013 and 2016, the percentage of small employers offering at least one self-funded health benefit plan increased from 13.3 percent to 17.4 percent—a 31 percent increase.

Why are more small businesses offering self-funded health benefit plans? I see three big reasons:

1: Self-funding can be a great tool to attract and retain employees.

When it comes to health care, employees want choice and affordable options. Self-funded health benefit plans can give your employees both. From comprehensive medical to preventive-only coverage, your employees will have a variety of options. And, they’ll have those choices at affordable prices. That can be a key tool to attracting and retaining employees in an increasingly tight labor market.

2: Self-funding provides flexibility.

Employers can customize their self-funded health benefit plans with different deductibles and coinsurance choices to fit their needs, whether it’s a preferred provider organization (PPO) plan design, consumer-directed health plan (CDHP) design, or a reference-based pricing or preventive-only plan design.

3: Self-funding can help lower employer costs.

There are a variety of ways self-funded health benefit plans can help employers lower costs. First, employers can receive refunds if there is a surplus of claim dollars in their prefund account at the end of the plan year. Second, claim dollars are not subject to state health insurance premium taxes, which can help lower costs (premium taxes average around 2 percent). And finally, self-funded health benefit plans give employers access to aggregate health claims data and demographic information. This data — available exclusively under a self-funded arrangement versus traditional health insurance — allows employers to better manage costs and encourage cost-savings measures their employees can practice, such as switching to generic medications, using in-network providers, and selecting a different level of care.

In the end, better understanding the ins and outs of self-funding will mean more choices for your small employer clients—and more success for you.

With some research and education on how self-funding works and the carriers/TPAs that offer administrative services, self-funded health benefit plan designs and stop-loss insurance, you can become well-versed in what’s available in the marketplace and learn if and when a self-funded health benefit plan design could be a potential fit for your smaller clients. Having a solid knowledge is a good start to have the advantage over another broker who didn’t evaluate self-funding as a viable option.

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A change for small biz could cost some employers their custom health plans

The article below is from Crain’s New York Business, written by Caroline Lewis

Park Slope Food Coop is among the employers that could be forced to join the small-group health insurance market

Faced with rising premiums in the group health insurance market, the Park Slope Food Coop opted five years ago to create a custom plan for its 74 full-time employees and their family members and pay for the costs directly.

“I’m convinced we would have had to raise prices if we weren’t self-insured,” said Joseph Holtz, general manager, who estimates self-insurance saves the co-op $300,000 to $500,000 a year.

The co-op is one of several hundred New York employers that will be forced to stop self-insuring next year, thanks to a change in the state’s definition of a small business. Small businesses, until recently defined as having between one and 50 employees, are not eligible to purchase so-called stop-loss insurance, which kicks in when health care costs exceed a certain threshold. Without it, self-insurance is too risky. Now the state’s definition includes companies with 51 to 100 employees. The law had largely gone unnoticed before the change, said Michael Ferguson, chief operating officer of the Self-Insurance Institute of America. “In the under-50 market, not a lot of companies are self-insuring,” he said.

The deadline for employers of 51 to 100 people to give up their self-insured coverage was extended from 2016 to 2018, but legislation that would permanently grandfather them in has so far stalled in Albany.

The state Department of Financial Services declined to comment on the rationale for denying small businesses the ability to self-insure. According to The Commonwealth Fund, if employers with 51 to 100 employees self-insure in large numbers, they could undermine the risk pool of the small-group market, leaving it with older, sicker beneficiaries.

The Coalition for the Homeless, a nonprofit with 65 full-time employees, is among those hoping to continue to self-insure. If no solution is found, the organization said it will have to join the small-group market when its plan expires in November 2018.

“We could probably get a plan that provides similar coverage for a similar amount of money,” said Dave Giffen, the coalition’s executive director. However, he added, the organization wouldn’t be able to “share in the upside” if employees use less health care than anticipated.

Self-insuring has also allowed the organization more flexibility in designing its plan and has resulted in fewer burdens on employees, said Giffen. For instance, he said, the plan allows employees to bypass step therapy, or the process of trying less costly drugs first, when accessing medication. It also aims to keep down the cost of visiting out-of-network providers.

“At an organization like this, where we’re perpetually understaffed and asking people to work long hours in a very difficult job, we want to make sure they have not just adequate health coverage but generous health coverage,” said Giffen.

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Paid Leave Bills Advance

One of the biggest concerns of small business owners continues to be the paid and unpaid leave bills passing out of committee. In the Senate, the Healthy Workplace Act S.B. 2147 would require all employers to provide up to 7 paid sick days each year. The House passed H.B. 3297, creating the Employee Paid Health Care Time Act, requiring any employer of one or more to provide paid healthcare time at a rate of one hour for every 22 hours worked for an employer of 50 or more and one hour for every 40 hours worked for employers with fewer than 50 employees.

The Federal Government isn’t the only governmental body pushing paid leave. Several states and even the City of Chicago are considering paid leave for a variety of hardships, from bereavement to bone marrow and organ donations. A 2015 survey by NFIB shows that the vast majority of small businesses already offer some type of paid leave, with many offering up to 2 weeks per year.

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