Uncertainty and frustration abound in the healthcare market today, especially with all of the brewing legislative changes and tension over the market’s response. On the employer-sponsored plan side of things the challenge to improve affordability goes on as well – but you can only make so many plan design changes to keep up. High deductible plan offerings are now pervasive, but costs continue to rise. And now carriers are looking past traditional fee-for-service models and moving to valued-based pricing to keep costs down on their end. But let’s not overlook self-funding as a cost-saving option.
More and more employers are self-insuring their plans for a multitude of reasons; potential for reduced costs, plan design autonomy and avoidance of state and federal taxes, among others. The large insurers have made self-funding available down to as few as 50 employees. Hybrid plans are also available to even fewer employees, allowing employers to get a taste of the advantages of self-insurance while keeping some fully-insured aspects intact.
Regional Third Party Administrators (TPAs) and National TPAs, many of which are owned by the large insurers, are as aggressive as ever. Stop loss does not require tremendous overhead and therefore the expenses are lower making it easier to make a profit. It can be very profitable business if the carrier’s book runs well from a “claims to premium” standpoint. There is also an increased proliferation of “captives” which are used as a vehicle for smaller employers to pool together under a large group, self-insurance wrapper. This has created more demand for reinsurance or stop loss insurance.
And self-insurance is really the only way an employer can cash in on favorable pharmacy pricing that insurance carriers have gotten fat on.
If you’re still sitting on the fence there is much to gain from looking at self-funding as an option. More insurers in the marketplace translates to more choice for the employer and more competition. This helps keep pricing down and provide options at renewal. Once-ambiguous contract terms are being replaced with agreements to “mirror” the underlying plan of benefits, which puts the employer more at ease. A great broker will have all the tools necessary to analyze this option and put it into action if it’s the right way to go.