The new year often brings benefit plan changes. Many employers are intrigued by the opportunities and savings that come with self-funding their health benefit plan. Here’s what you need to know before considering a move from being fully insured to self-funded.
A growing number of businesses are proving that a self-funded health insurance plan can be a cost-effective alternative to the traditional fully insured approach. When a company self-funds, it is taking on the responsibility – the risks and rewards – of paying the medical and prescription drug claims of enrollees. Three out of five American workers are covered by a fully or partially self-funded health plan. In recent years, even organizations with fewer than 100 employees have embraced self-funding.
The best advice for those considering self-funding is to tap into expert advice to guide the transition. Speak with a broker who understands self-funding and stays current on the latest issues. A good broker will put his or her knowledge to work on your behalf to check your data, analyze your options and find reliable partners to help. In addition to a broker, you will need:
- A third-party administrator (TPA) to pay claims and administer your health benefit plan.
- A pharmacy benefits manager (PBM) to administer your prescription drug plan.
- A network to negotiate discounts with the health care providers who provide care to enrollees.
Depending on the needs of your organization, you may want additional partners for specific services. Picking the right partners will impact how employees view your plan, whether your plan achieves your financial goals and whether the plan improves employee health and wellness.
Your experience with your benefits plan can help determine whether self-funding makes sense for you. If your health care costs continue to increase and you don’t know why, or you need access to services you aren’t getting through your fully insured plan, self-funding may be a better choice. Your broker can help you talk through your specific health benefit plan challenges. An important part of that discussion will be around reinsurance. Reinsurance provides a safety net for your self-funded health plan by setting the maximum cost of claims that you would be required to cover during the plan year. Your goal is to ask questions and feel confident that you know the financial risks and rewards of self-funding, as well as any challenges that may arise along the way.
Self-funding allows you to create an insurance plan that matches the needs of your workforce and the goals of your organization. It also lets you adjust to the realities of your marketplace for employee recruitment and retention.
Once you successfully switch to self-funding, you own your plan. That means you have the data to make the right decisions for your employees’ health and can help manage the trend of health care costs in the future. If you’ve been on the lookout for a quality health care plan that can be customized to your employees’ needs, self-funding could be the solution for you.
About the Author
Melina Kambitsi, Ph.D., is the senior vice president of business development and strategic marketing for The Alliance. Since joining The Alliance in 2017, she has led the team responsible for membership growth and retention of the cooperative. Prior to joining The Alliance, Dr. Kambitsi was with Network Health in Milwaukee and Menasha, where she was the chief sales and strategy officer. She also previously was senior vice president of sales at Blue Cross Blue Shield in Honolulu, Hawaii, and the vice president of sales, marketing and product development at Blue Cross of Northeastern Pennsylvania.