Is self-insuring your company’s medical plan the best way to slay the traditional fully-insured medical carrier dragon?

Yes, self-insured plans can potentially reduce an employer’s overall healthcare costs and lead to lower annual premium rate increases. Before discussing the positive aspects of self-insured medical plans, let’s determine if you can stomach some of the insurance nuances that make it all work.

Self-Insuring is exactly as represented – you are underwriting the majority of the risk. Can your entity take on the financial risk that is assumed with a self-insured plan? When a large individual claim occurs or when the group has an overall high claim year, you as the employer must have the cash on hand to fund up to the “stop loss limit“ on those claims. The “stop loss limit” is the claims loss insurance limit you will purchase through a private carrier that would act as the corporation’s re-insurer. Over a 10-year period, the average employer with 100 employees or more will typically see 2-3 years of above average claims.

As an employer, are you willing to take on an in-depth and ongoing role in plan management? Knowing the details of your employee and family member’s health is critical to determining plan costs, care, and design.

Many employers cannot and do not want to take on certain roles and responsibilities. However, for those employers who have the bandwidth to do so, self-insured medical plans are an excellent way for the employer to potentially reduce overall medical costs and annual rate increases, keep employees healthier, improve cash flow, and eliminate fully-funded carrier plan state taxes and margins.

Fully-funded carrier plan rates follow trends. They hurt those employers who are managing a healthy workforce and help those who are not. With rates increasing significantly over the past 5 years it is no surprise that 3 out of 5 workers are insured by self-insured plans. With the uncertainty in the healthcare market, carriers are currently conservatively pricing new rates. This means higher premiums to consumers which can provide a larger cushion to the carriers.

Since employers with self-funded plans monitor and manage their own claims, they have direct knowledge of their employees’ health. This allows the employer to beef-up their focus on wellness and preventative care programs that help educate employees in areas of concern due to claim results.

Most employers with self-funded medical plans see lower premium rates than fully-funded carrier plans due to a healthier employee population and claims knowledge. They also do not have to pay state taxes and carrier margins that are imbedded within fully-funded plan premiums.

It is important to have the right broker and TPA to partner with, but here’s what an employer can typically anticipate when they move forward with a self-funded medical plan:

1. The medical plans have national provider networks
2. Stop-loss insurance will protect the employer from large individual claims and high aggregate claim years
3. Custom plan and coverage designs
4. National pharmacy networks
5. Plan designs are identical for out of state employees
6. Proactive care management
7. Disease and wellness management
8. Detailed experience reports

These plans best fit employers with 100 or more employees, but may make sense for even those with 50 or more.

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