Group Self-Funded Health Insurance Plans
Advantages of a
Self-Funded Medical Plans
Can mean savings through greater Control, Flexibility, and Reporting.
Advantages of Self-Funded Medical Plans:
Greater control of your plan design
More insight into how health care dollars are spent
Flexibility to adjust your benefits as needs change
Why Self Funded Plans May Be For Your Group:
Potential Tax Savings
Only pay for claims incurred
Robust reporting tells you where your medical dollars are being spent
Full protection through Stop-Loss Insurance
Easy to administer with a monthly bill just like Fully-Insured plans
A flexible portfolio of plans allows you to design a plan that fits your company’s needs:
Choice of preventive care options
Choice of deductibles
Choice of coinsurance
Choice of out-of-pocket
Choice of prescription benefits
Plans provide personalized service for you and your employees
Plan features that help to reduce claims
Preferred Provider Network billing agreements reduce the claim amounts
Chronic Disease Management assistance helps prevent unnecessary claims
Prescription Benefit Management reduces Rx claims
Wellness programs and Preventive Benefits help keep your employees and their families out of the doctor’s office
Insurance company Claims Administration prevents bogus claims
The Next Step:
A proposal for Self-Funded Medical will provide more detail and answer questions
Self Funded Insurance Plans FAQ (Frequently Asked Questions)
Q. What are self-funded (self-insured) health plans?
A. In a Fully-Insured Health Plan, an employer group contracts with a traditional insurance company and the insurance company pays employee claims and assumes the financial risk of the groups claims. A self-funded group health insurance plan (or a 'self-insured' plan as it is also known) is a plan where the group employer assumes the financial risk for providing health benefits to their employees. Employers pay for each employee claim as they are incurred instead of paying a fixed monthly premium to the traditional insurance company. Typically, a self-insured employer will set up a special trust fund to designate money (corporate and employee contributions) to pay employee's incurred claims.
Q. How many people receive coverage through self-insured health plans?
A. According to a 2000 report by the Employee Benefit Research Institute (EBRI), approximately 50 million workers and their dependents receive benefits through self-insured group health plans sponsored by their employers. This represents 33% of the 150 million total participants in private employment-based plans nationwide.
Q. Why do employers use self funded health plans?
A. There are manyl reasons why self funded health plans are very popular:
Customization: The employer can customize the plan to meet the specific health care needs of its workforce, as opposed to purchasing a 'one-size-fits-all' insurance policy.
Control: The employer maintains control over the health plan reserves, enabling maximization of interest income - income that would be otherwise generated by an insurance carrier through the investment of premium dollars.
Cash Flow: The employer does not have to pre-pay for coverage, thereby providing for improved cash flow.
ERISA: The employer is not subject to conflicting state health insurance regulations/benefit mandates, as self-insured health plans are regulated under federal law (ERISA).
Taxes: The employer is not subject to state health insurance premium taxes, which are generally 2-3 percent of the premium's dollar value.
Freedom: The employer is free to contract with the providers or provider network best suited to meet the health care needs of its employees.
Q. Is self-insurance the best option for every employer?
A. No. Since a self-insured employer assumes the risk for paying the health care claim costs for its employees, it must have the financial resources (cash flow) to meet this obligation, which can be unpredictable. Therefore, small employers and other employers with poor cash flow may find that self-insurance is not a viable option. It should be noted, however, that there are companies with as few as 25 employees that do maintain viable self-insured health plans.
Q. Can self-insured employers protect themselves against unpredicted or catastrophic claims?
A. Yes. While the largest employers have sufficient financial reserves to cover virtually any amount of health care costs, most self-insured employers purchase what is known as stop-loss insurance to reimburse them for claims above a specified dollar level. This is an insurance contract between the stop-loss carrier and the employer, and is not deemed to be a health insurance policy covering individual plan participants.
Q. Who administers claims for self-insured group health plans?
A. Self-insured employers can either administer the claims in-house, or subcontract this service to a third party administrator (TPA). TPAs can also help employers set up their self-insured group health plans and coordinate stop-loss insurance coverage, provider network contracts and utilization review services.
Q. What about payroll deductions?
A. Any payments made by employees for their coverage are still handled through the employer' s payroll department. However, instead of being sent to an insurance company for premiums, the contributions are held by the employer until such time as claims become due and payable; or, if being used as reserves, put in a tax-free trust that is controlled by the employer.
Q. With what laws must self-insured group health plans comply?
A. Self-insured group health plans come under all applicable federal laws, including the Employee Retirement Income Security Act (ERISA), Health Insurance Portability and Accountability Act (HIPAA), Consolidated Omnibus Budget Reconciliation Act (COBRA), the Americans with Disabilities Act (ADA), the Pregnancy Discrimination Act, the Age Discrimination in Employment Act, the Civil Rights Act, and various budget reconciliation acts such as Tax Equity and Fiscal Responsibility Act (TEFRA), Deficit Reduction Act (DEFRA), and Economic Recovery Tax Act (ERTA).
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Forbes.com Article: See here
Meet The Future Of Small-Business Health Insurance: Self Funding
Aug 30, 2017
Robb Mandelbaum - Contributor
Back in October 2013, a few months before most of the Affordable Care Act provisions that restructured health insurance markets took effect, a broker described the great lengths to which he thought many small businesses might go in order to keep their relatively low insurance premiums. He anticipated that these small companies would start to pay employee health care costs out of their own treasuries — what's called, in the industry, self-funded insurance.
While self-funding is common among larger companies — those with at least a couple hundred employees — few smaller firms had the wherewithal to self-fund employee health care. Self-funding is extremely risky, and while a bigger company can spread those risks across a bigger payroll, they can swamp a smaller business. And for the last three years, the broker's prediction didn't materialize. According to the Kaiser Family Foundation's most recent survey of employers, the share of insured workers in small firms (those with less than 200 employees) in self-funded plans stayed low, and has even fallen. In 2016, it stood at 13 percent.
But a new study published by the Urban Institute suggests that this could soon change. The report, which examined small-business insurance markets in six states, found that insurers and brokers are quickly warming to self-funded insurance arrangements — sometimes called level-funded plans — for small companies. One broker told the authors, all research professors at the Georgetown University Health Policy Institute, that the new arrangements are "the next best thing since I don’t know what in health care." All of the largest insurers, including United Healthcare, Aetna, Cigna, and Blue Cross affiliates like Anthem and Humana, now offer self-funded arrangements.
Though the employer pays the cost of medical services in a self-funded plan, insurance carriers have added elements to make it more palatable to smaller groups. A worker who gets seriously sick or hurt can expose the self-funding company to hundreds of thousands of dollars — or more — in medical bills, so the small business can buy back-up, or stop loss, insurance that reimburses the company when claims exceed a certain level. And because the timing of misfortune, too, is unpredictable, carriers have created a mechanism, level funding, that smooths the payments into equal monthly installments. (If claims are low and the company overpays, the carrier reimburses it at the end of the year.) The insurer administers the arrangement and can offer lower rates for medical services through its network of providers.
Many of the Affordable Care Act's market reforms, including the coverage requirements known as essential health benefits, do not apply to self-funded plans, so in theory, these employers can decide for themselves what they will or won't cover. But companies that self-fund are not part of any insurance carrier's risk pool, and that is the real draw. The Affordable Care Act ended the practice in the small-group market of using a group's claims experience to set rates, and instead required insurers to pool the risk across all of their small group business, which is known as community rating. That was good news for businesses with older or less healthy workers, which saw their premiums moderated by younger and healthier groups. But naturally it's bad news for those younger, healthier groups. "The ACA changed the ballgame for the small group market and increased the incentive for smaller and smaller groups to self-fund," says Sabrina Corlette, one of the study's authors.
But for several years they didn't. Many of these healthy small groups have been able to keep the plans they had in 2013, complete with health-history underwriting, thanks to rules from the Obama administration. Those rules have been extended to permit these "grandmothered" plans to remain in effect through the end of next year. So it's unclear why insurers are promoting self-funding now. It's possible they're aiming it at new businesses that weren't around (or insured) in 2013 and would otherwise have to buy plans that comply with Obamacare rules.
But regardless, insurers do appear to be marketing these plans to ever-smaller groups. In 2013, Aetna identified the market for its self-funded plans as mid-sized companies with 100 to 500 enrolled employees, but it now says that self-funded plans can be a good fit for companies "regardless of size." One broker told the Georgetown researchers, "Originally it was 25 and up, and now [insurers are] looking to going down as low as 10 people." Or even lower. When it announced earlier this year that it would offer Aetna's self-funded plans, the HR platform and broker Zenefits pitched the product to companies with as few as five enrolled employees. (Where insurance companies are usually circumspect about the point of self-funding, Zenefits, like other brokers, is blunt. "In general, groups should be healthy and expect a low number of high-cost claims," it said the announcement, "and want to move away from the ACA community rating.")
And states appear to be paving the way for this charge. Until recently, states made it difficult for small groups to buy stop loss insurance, says Corlette. "They felt that these were too risky or that the small businesses were not sophisticated enough to enter into these arrangements." The stop loss insurance, if it's not considered health insurance, can be priced according to a group's claims experience. But in 2017, three of the six states the researchers studied changed either laws or regulations to make it easier for small companies to buy the stop loss insurance that makes self-funding feasible. Corlette says these moves indicate a broader trend to deregulate the market.
But Corlette and the other researchers say self-funded plans will further divide an already segmented small-group risk pool. If the Obama-era grandmother rules are good for healthy businesses, they are decidedly bad for older and sicker workforces with insurance that complies with Obamacare rules. "There are winners and losers when you segment the market either with grandmothered or self-funded plans," Corlette told me back in February. "Over time, of course, the problem is that in the portion of the market that is serving those older and sicker groups, premiums go up, and you have the health insurance death spiral. You have more employers unable to afford the premiums, and they drop out, and you see a deterioration in that market. So over the long term, it's fundamentally destabilizing to have this kind of segmentation."
In the new report, insurers told the researchers they are already anticipating this outcome. An insurer in Minnesota is planning higher premiums for Obamacare plans. And in Pennsylvania, a carrier confided that it would eventually withdraw its fully insured plans for small businesses. "To be honest with you, we wouldn’t offer an ACA small-group product in the future," the insurer said. "We’d basically have level funded down to 8–10 life groups, and everyone else would have to go to an individual product."
End of Forbes Article
As an employer, the ability to offer a group sponsored health insurance plan can help in the recruiting and retention of your best talent. Providing a competitive health insurance option also allows your employees to pay for medical bills and provide safety and security for themselves and their families.
Using our services allow you the following:
Convenience: We are a "One stop shop" for Medical, Dental and Health Savings Accounts. You are then billed monthly for all of the plans your employees choose.
Employee Choice: You will be able to offer every health insurance plan available in the State of Utah and beyond.
Simplified: Employees can compare a variety of health plan benefits, premiums and network side by side.
Controllable Cost: You as the employer get to decide how much you can afford to contribute. The plans allow you to use a flexible defined contribution approach. There are no additional fees to participate; the plans and premiums are the same as buying direct from the insurer.
Open Year Round: You can register your business any time
throughout the year.
Call Greg Davies at (435) 767-1415 to set up a consultation for your business