Many organizations with under 500 employees are still leveraging a health plan without frequently evaluating the underlying financing strategy of the plan. This can be a costly oversight once they look at the projected increases in costs over time.
While these organizations may be under the impression that they have chosen a plan with strong cost-effectiveness, it is highly likely that there is a lot of room for improvement. These days, there are various proven, safe, and secure methods to finance your health plan more strategically.
Note: According to a new study from RAND Corporation, employer-sponsored health plans paid on average 224% of what Medicare paid to hospitals for the same services at the same facilities. The report covers billing for hospital inpatient and outpatient services in 2020.
Why Should You Take a More Strategic Approach to Financing Your Health Plan?
Taking the time to dive into your health plan strategy comes with a host of benefits. Most notably, a more optimized plan will cost your employees less, position your organization to attract better and retain staff, and potentially free up resources to fund other priority endeavors.
Before engaging brokers, consultants, insurance agents, or other market resources, you may wish to familiarize yourself with the various approaches to financing. It is also important to perform an initial assessment. In this blog, we will outline the steps business should take to DIY their self-funded health plan.
But Can’t Self-Funding Insurance Be Dangerous?
It’s called self-funding, but that doesn’t mean that employers bear all the risk and pay for employee’s claims out of pocket. Employers still buy insurance, but they are doing so strategically to ensure they are not spending money they don’t have.
In other words, employers decide what they want to pay, at which point the health insurance coverage will take over. With smart planning, self-funded insurance plans are very low risk.
If at any point you feel that certain terms may put your business at risk, we invite you to contact our team so we can be of assistance!
So, how can you gauge whether your business’ health plan could benefit from a revitalization? You will first need to perform a self-evaluation. Start out by reviewing your last three years of insurance rate increases. From there, you should be able to roughly project the next five years of growth based on the previous rate of change.
Now that you have a rough idea of how your health expenses are projected to grow, it’s time to compare these figures to your employer’s overall projected growth over the same time interval. For many businesses and organizations, this part of the process reveals the unsustainability of their current health plan as time moves on. Let’s look into how to correct that with a DIY approach.
Tip: Sometimes it’s best to adjust your funding strategy during times of strong health throughout the general population.
After considering the current known and unknown health of your organization, it’s time to complete some preliminary research. The goal here is to learn about, evaluate and compare the standard funding strategy options and ultimately end up making selections that reflect the needs of your team and incentivize your top contributors to stay on board for the long haul. At a minimum, we would suggest researching the following funding strategy options and assessing their relevance to your workforce:
- Fully insured vs self-funded
- Health Reimbursement Arrangement (HRA)
- Medical Expense Reimbursement Plan (MERP)
- Carrier Managed Level Funding Arrangement
- Consortium Level Funding Arrangement
- Captive Level Funding Arrangement
- Graded Funding Arrangement
- Bundled Full Self-Fund with Stop-Loss Insurance
- Unbundled Full Self-Fund with Stop-Loss Insurance
Tip: While it may seem daunting to gain a firm understanding of these terms on your own, it’s actually quite easy with the right partner!
Selecting Your Plan and Administration Strategy
Once you have an idea of which funding strategies you are likely to pursue, it’s time to research a plan administration strategy. Ultimately, you will be making the decision of whether a Third-Party Administrator or Carrier should administer your health plan. In most cases, we find that a TPA provides a host of benefits for companies of any size that are stretched for time and capacity. If nothing else, the improved cash flow from lowered monthly charges justifies the switch for many businesses. You may also discover that a TPA offers your business greater flexibility compared to the one size fits all approach that many carriers employ.
Selecting Your Pharmacy Benefit Management (PBM) Strategy
As you zero in on the final touches of your self-funded health plan, you will need to select a Pharmacy Benefit Management that allows your team to achieve the most positive health outcomes through access to the medications they need. As you compare Pharmacy Benefit Managers, it is critical to have these factors in mind:
- Reasonable access to appropriate medications your team may require
- Authorization and step-processes to keep costs low while guaranteeing employee safety
- Access to rebates
A Few Parting Words
As you consider entering into the exciting process of creating a self-funded healthcare plan for your organization, there are a few terms we implore you to become familiar with in the interest of ensuring you thoroughly understand the terms of each contract you review:
- Lasering – Adjusted deductibles to account for individuals who may be pre-disposed to specific ailments.
- Run-In/Runout Language – The time interval in which the TPA will provide services outlined in your agreement.
- Terminal Liability Protection – Guarantees coverage for any gaps that occur amid your transition to a self-funded plan.
- Specific Deductible – Offers built-in plan protection and compensation after an individual’s specific claim exceeds a certain dollar amount
- Aggregate Deductible – Similar to specific deductibles, except the deductible is adjusted and applied to a group, rather than individuals.
- Corridor – Built-in protections in the event that a coverage limit is exceeded and the organization fails to qualify for additional relief.
- Reinsurance Carrier – In simplest terms, reinsurance carriers effectively serve as insurance companies for insurance companies. Negotiations with a reinsurance carrier can reduce the risk and impact to your business in the event of a catastrophic loss.
Attempting to Revitalize Your Benefits Package? You Don’t Have to Go it Alone. Collaborate with TriBridge Partners for Your Self-Funded Health Plan
Searching for the ideal healthcare coverage for your team? TriBridge Partners is ready to help! To discover how our experts can assist your organization or business, please call our office today at 240-422-8799, email Jessica Storck at Jessica.firstname.lastname@example.org, or find us on LinkedIn.