Have you ever been frustrated at your ever increasing medical insurance renewal and ask to have a copy of your claims experience? You're trying to decipher how these insurance companies can keep charging the high premiums they demand. And then you're told through some nebulous terminology about "trend" and "community rating" and some other fuzzy logic as to why your rates are going up as much as they are. The insurance companies really don't want you to know what your claims experience is because...
The main reason for holding this information back is insurance companies' fear that if employers actually knew what their costs were, very few would be fully insured.
Is Self-Funding Right For You?
Questions & Answers
What makes self funding worth considering? You've heard of the 80/20 rule; you get 80% of your results from 20% of your efforts. It applies in health insurance, just as in everything else. The healthy 80% of companies overpay and effectively subsidize the sickest 20% of companies.
What are the advantages of self funding? The opportunity to substantially reduce your costs.
What are some disadvantages of self funding? If you employ more than 50 employees and you experience multiple years of poor claims experience then your self-funded plan could actually end up costing you more than an equivalent fully insured plan. If you employ 50 or fewer employees and are located in Connecticut then poor claim experience is not an issue. If your self-funded plan experiences poor claim experience, then you can switch back over to a fully insured plan, thereby, eliminating the traditional risk associated with these types of plans.
How come my current agent hasn't talked to me about these plans? Self-funded plans require a more comprehensive understanding of the relationship between risk and reward. Many agents working within the small and mid-sized business market typically just quote the fully insured plans available (Aetna, Anthem BC/BS, Connecticare,and United/Oxford) because of their limited experience with self-funded style plans.
I just renewed my medical plan a couple of months ago, should I wait until my next renewal to explore if self-funding will work for my company? No, absolutely not. The only reason to wait is because you want to put off saving money until the following year.
Do I get penalized for canceling my fully insured plan before the anniversary date? No, fully insured medical plans are month to month, there is no short rate penalty for an off-cycle cancellation.
Do I need to be a large company to self-fund? No, companies as small as 5 employees can have a self funded plan.
Is the plan still set up as an HMO or POS? Yes, you can design your plan to replicate your current plan of benefits. For example, your employees pay a $30 copay for office visits, $45 for a specialist, they have a $500 per day to a max of $2,000 deductible for hospital and your copay for prescriptions is $15 generic, $30 preferred brand, and $40 non preferred brand.
Who are the HMO and POS providers? We use many national providers. Aetna, CIGNA, and PHCS to name a few.
Are benefits capped? Is there a limit on a maximum claim? No, benefits are unlimited both in-network and out-of-network.
What if I have out of state employees? This is not a problem, we can typically find a network that the employee can find his/her providers in.
I have a plan with a high deductible and I cost share with my employees, so I think I'm already Self-Funded? No, you are not in the technical sense. Your plan is still fully insured from a rating standpoint. You are paying the "manual" rates. The "manual" rate is lower because your deductible is higher but you will not participate in any greater savings as you would with a true self-funded plan.
We have a Health Care Savings Account (HSA) can this be self-funded? Yes, remember with self-funding you have more plan design flexibility than with a traditional fully insured whether it is in the form of an HSA plan or not.
Does self-funding involve a lot of risk? If you use the correct stop loss carrier and stop loss level you will limit the risk to a level with which you are comfortable. It's very important to work with qualified advisors who understand self-funded insurance plans and can help you determine if this type of plan is right for your company.
Is self-funding complicated? That depends. It can sound real complicated when talking to someone that really doesn't have a grasp on how these plans work. We understand these plans, we have been designing and implementing them for our clients for the past 20 years. We specialize in working with small and mid-size businesses. Self-funding is very popular in the larger group market, it's hard to find a professional that knows how these plans work for the small to mid-size market.
What if someone has a very large claim? This is called a shock claim and is why we will design a stop-loss insurance policy into your plan. It will cover those catastrophic claims and prevent a single large claim from adversely impacting your plans results..
What if quite a few of my employees get sick at the same time? Besides buying stop-loss insurance for catastrophic claims, we would also design an aggregate stop-loss policy, which will protect you against the cumulative costs of many smaller claims.
What if I want to go back to a fully insured plan? You can always return to a traditional fully insured plan even if you are in the midst of experiencing some very large claims.
What are we talking about as far as potential savings? Potentially...quite a bit of money. We see savings from 10% to upwards of 40% of premiums paid towards a fully insured plan depending on claim experience.
This sounds to good to be true, is there a catch? No catch. Give us a call and we'll work up some various plan designs, we will educate you on how these plans work and then you can decide if it's right for you.
Self-funding your goup benefit plan will eliminate the high costs of fully insured premiums which include: Profit Margins, Risk Charges, Reserves, Contingency Margins, State Regulations, Premium Taxes and Retention and Persistency Bonuses. In addition, benefit plan design will be customized to that employer instead of the off-shelf plans from insurance carriers.
Securities offered through The O.N. Equity Sales Company (ONESCO), Member FINRA/SIPC, One Financial Way, Cincinnati, OH 45242 (513) 794-6794
Investment Advisory Services offered through O.N. Investment Management Company (ONIMCO)
Boccaccio & Associates is independent of ONESCO and ONIMCO.
Licensed to offer securities, insurance and annuity products in Connecticut, Massachusetts, Vermont, New York, and Florida.
Obamacare Creates New Opportunities to Control Group Health Insurance Premiums
Many companies are experiencing double digit increases in their health care coverage. A self-funded plan allows employers to have more financial control over their group health plan; as opposed to a traditional fully insured plan with high premiums built on a "use-it or lose-it" chassis. When an employer self-funds, their fixed costs are made up of an administrative fee and a stop loss insurance premium, which is much lower than the fixed costs of a fully insured plan. Then the employer pays for the actual claims experienced which can lead to significant potential savings.
Let's clarify a few important points: 1. Self-Funding does not mean going without insurance coverage, employers self-fund up to a certain stop loss at which point their stop loss insurance kicks in. 2. Self-funding is not a fully insured plan with a high deductible whereby the employer splits the deductible with the employee.
3. Self-funding is not just for large companies, we have plans for businesses with as few as 5 employees.