Self-Funded vs. Fully-Insured
Benefit Health Advisor has a deep understanding of our clients’ needs.
Each group faces different challenges and cost pressures in their marketplace. Benefit Health Advisor is a full-service employee benefits firm. As such, we can provide all available options to our clients including custom self-funded plans, bundled self-funded plans, and fully-insured plans.
Each type of benefit plan meets different needs for different clients.
Arguably the greatest asset offered by self-funding is the complete freedom to structure benefits according to needs of your company.
SELF-FUNDING
Partially self-funded medical plans are established to gain better control over providing medical benefits to employees.
By self-funding a plan, the employer takes financial responsibility for paying the medical claims of members. This allows the company to gain control over expenses and realize savings due to lower claims volume, lower taxes, and lower overhead costs.
A properly managed self-funded benefits plan can benefit your organization in many ways.
BENEFITS
Claim Corridor Savings – Fully-insured carriers set their rates based on the expected claims level of the group and add a “corridor” or a margin for error of 20 to 25% of the expected claims. Reinsurance carriers for self-funded plans also calculate a corridor but if the claim expenses do not reach that level, the employer keeps the unused claims funds.
Lower Premium Taxes – Each state charges premium taxes on insurance policies. Fully-insured plans pay taxes on the full amount of the premiums which includes all claim expenses and administration costs. Self-funded plans only pay taxes on the actual reinsurance premium, which is only a portion of the plan cost.
Lower Administrative Costs – Self-funded benefit plans have traditionally enjoyed lower administrative costs and overhead. The profit margin and risk charge of insurance carriers and administration companies are eliminated for the bulk of the plan.
No State-Mandated Benefits – Self-funded benefit plans are regulated by the federal government under the ERISA laws. Fully-insured plans are regulated by individual states. Self-funded plans gain administrative simplification from not needing to manage state-specific requirements.
Plan Stability – Self-funded plans reduce employee disruption that results from frequently changing insurance carriers to maintain competitive rates. Employers can maintain competitive pressures on rates and fees within the plan by bidding the reinsurance carrier each year. However, the claim administrator does not need to change, providing a consistent entity with which employees interact for claims and customer service.
WHY SELF-FUNDING
Increasingly more employers are turning to partially self-funded health plans each year.
Self- Funding is one of the most effective ways employers can control the rising costs of healthcare coverage.
Control of Plan Design – The group has complete flexibility in determining the appropriate plan design to meet the needs of the employer and employees. The employer can also redesign its plan at any time.
Cost Reporting – Information is much more accessible when you have a self-funded plan. At Benefit Health Advisor, we provide quarterly reporting of costs, benchmarks, utilization, lag reports and more. Custom reports can also be generated and this information allows employers to further understand the needs of the employees and provide benefits more effectively.
Effective Provider Networks – We can offer an integrated program of PPO networks for multi-state employers so that you have a network or multiple networks that are strong in each of the locations that you have employees.
Cash Flow – Cash Flow is improved when money formerly held by the insurance carrier in the form of reserves for unreported and pending claims is freed for use by the employer.
Guidelines
DIFFERENCES
PLAN COMPONENTS
All components of a fully-insured plan are provided by the same company. With a self-funded plan, each portion of the benefits plan is selected from a number of specialized vendors providing the most relevant choice to the employer at the least cost.
rESERVE HANDLING
Premiums are paid at the beginning of every month with fully-insured plans and the insurance carrier manages and retains any excess claims funds set aside for benefit payments. With a self-funded plan, the employer keeps any excess claims funds that were reserved for benefit payments.
PLAN DESIGN
Fully-Insured plan designs are set by the insurance carrier in pre-determined benefit plans. Self-Funding allows benefit levels to be customized to meet the employer’s needs and can be changed at the employer’s request.
pROVIDER ACCESS
Most insurance companies have their own national network which provides access to providers at discounted prices. With a self-funded plan, the employer chooses the provider network that gives the best access and claim discounts.
PLAN CONTINUITY
In order to switch carriers for more competitive fully-insured rates, all aspects of the plan must be switched to the new carrier. Unbundled self-funding allows an employer to change reinsurance carriers to obtain the best rates without changing the claim processor, providing greater stability and continuity to the plan.
pROPER RISK MANAGEMENT
The experts at Benefit Health Advisor will be able to assist you in determining which benefits model best fits your organization’s specific situation. Our initial analysis will consider all relevant factors as we research all of the available options and plans available to you.
PROPER EDUCATION
At Benefit Health Advisor, we are committed to helping you understand the different options available in order to make the best choice possible. We have helped hundreds of organizations transition from one benefits model to another and are prepared to assist you however we can.
What’s the Difference?
Bundled vs Unbundled
A bundled approach to partially self-funded benefits means that all administration services and insurance are provided by a single healthcare company.
An unbundled approach separates the different services needed to administer the plan and contracts with specialized companies to manage or provide each portion of the plan.
This is what a Bundled Plan looks like
Unbundled Plan Components
Reinsurance Carrier: The employer purchases reinsurance to protect themselves from large individual claims or a high volume of small claims.
Claim Processor: The claim processor adjudicates and pays the medical claims for the plan. They also coordinate the administration with the other parts of the benefit plan to ensure the medical claims are processed according to the plan document. The administrator also obtains provider discounts on large claims, seeks reimbursement from the reinsurance carrier, completes legal documents, and other administration functions.
Prescription Benefit Manager: A Prescription Benefit Manager (PBM) maintains a network of pharmacies to provide prescriptions to plan participants. The PBM obtains favorable pricing from their member pharmacies, saving the plan prescription claim expenses. The PBM also administers all other aspects of the prescription benefit.
Network: The network is a group of doctors that have contracted to provide services to members at a discounted rate. The plan saves money when members use member physicians, so the medical plan usually includes incentives for members to use the network doctors.
Care Management: Care management includes large case management and disease management. These services are provided by medical professionals to intervene and assist in the management of catastrophic illnesses, helping to provide the best and most cost-effective care possible.
Wellness: A properly implemented, clinically-based wellness program helps plan participants live healthy lives, improving productivity and minimizing medical claims.