Self-funded plans – How much can you really save?

We talk a lot about how much money you can save by self-funding your health plans, but when it comes to the dollars and cents, how much can you really save? Here is a scenario from one our actual clients. We’ve changed the company name for privacy.

ABC Hospitality has 139 individuals and is currently fully insured with a “fully insured” carrier.

  • Current Premium $650,000 annually.
  • Claims experience shows that only 40% of ABC’s annual health insurance premium is due to claims.

If ABC Hospitality, sets up its own Self-Funded Major Medical Plan, with a PPO, and better administration, why can’t they then retain the excess funding instead of paying it to the fully insured carrier?

Partially Self-Funded Healthcare Quote with Reinsurance for ABC Hospitality:

Specific Deductible: $25,000.00

Specific Contract Period: Incurred from [1/1/16] through [12/31/16], paid through [3/31/17]

Aggregate Contract Period: Incurred from [1/1/16] through [12/31/16], paid through [3/31/17]

Fixed Costs

Employee Only - $204.50

Family

Monthly fixed costs

96 Covered

43 Covered

$19,632.00

$8,793.50

$28,425.50

Maximum Claim Factors/Costs: (Aggregate Factors)

Employee Only - $212.97

Family

Monthly fixed costs (aggregate attachment point)     

96 Covered

43 Covered

$20,445.12

$9,157.71

$29,602.83

Conventional Equivalents: (total maximum monthly costs)

Employee Only  - $417.47

Family   

Total Maximum Monthly Costs    

96 Covered

43 Covered

$40,077.12

$17,951.21

$58,028.33

Maximum Annual Plan Year Cost (worst case scenario)  

$696,339.96

Fixed Costs includes: I.D. Cards & Electronic Provider Directories, Plan Document, Employee Only Booklets, Aggregate & Specific Reinsurance, Monthly Accommodation, TPA Admin Fee, PPO, HIPAA, EDI, Cobra & utilization review.

ABC’s worst case scenario is $696,339.16, ABC must reserve $58,028.33 monthly for claims. But this is only in a worst case scenario, which is rare. This can only happen with everything goes wrong with the self-funded plans and there are catastrophic medical conditions and illnesses.

Analysis: While ABC’s self-funded rates took a slight increase over this year’s premiums, they were facing a potential 6% increase from their current carrier. As you can see, the self-funded quote is slightly higher but if you analyze their claims trend over the past year, ABC Hospitability has the potential to get $166,788.00 back in claims funding.

Note: Not only can an employer potentially save money on their returned claims but they can roll their 1st years self-funded savings into reserves for their second year. When they increase their reserves, they can afford to take on more risk which lowers their fixed costs each and every year. This leads to an even greater reduction in their overall costs.

As you can see, the potential amount an employer can save can be significant but it also enables an employer to have more control over plans. A common misconception is that control only means you get to design your own benefits but you can also structure your plan to pay in different ways and incentivize employees to catch billing errors and lead healthier lifestyles. Let’s start the process today and get you and your clients self-funded.

Self-Funded health plans, the new standard

self-funded-health-plans-the-new-standardDue to rising health insurance premiums, more and more employers are opting to self-fund their employee health benefit plans. According to a report done by the Employee Benefit Research Institute (EBRI) the percentage of U.S. private sector employers offering at least one self-funded health plan rose from 28.5 to 89 percent from 1996-2015. Small and midsize employers all over the country are opting out of their traditional benefit plans in favor of self-funding their employee health plans.

It is important to note that just from 2013 to 2015:

Small Employers rose from 13.3% to 14.2% and Midsize Employers rose from 25.3% to 30.1%.

self-funded-increase-graphic-01

self-funded-increase-graphic

It’s hard not to draw a connection between the implementation of the Affordable Care Act (ACA) and the increase in self-funded employers. Under the federal Employee Retirement Income Security Act of 1974 (ERISA), which provides the legal framework for the uniform provision of health benefits by employers doing business anywhere in the country, state laws (other than insurance laws) are generally pre-empted. This means that self-funded health plans may not have to satisfy state health insurance laws, including state-mandated reserve, benefit, claims, premium, and other requirements, which results in ease of administration and lower expenses. In contrast, fully insured plans are required to cover state mandated benefits and pay state insurance premiums.

Not only that but the ACA identifies 10 benefit categories that must be included as essential health benefits for fully insured small-group market plans. But self-funded plans are not required to cover each of these essential health benefits.

When self-funded arrangements are properly designed, like the ones FreedomCare offers, there are several ways an employer can benefit.

Help your clients join these savvy employers from around the country and take control over their plan by self-funding their employee health benefits. By choosing FreedomCare, we take the leg work out of self-funding, we handle all administration, paying of claims and reinsurance. The ease of a traditional plan with the value of self-funded.

3 strategies to cut healthcare costs without cutting benefits

3 strategies to cut healthcare costsAccording to a report done by PwC, medical inflation still outpaces general economic inflation by a 4.5% growth rate. It can be a difficult juggling act for employers to keep health insurance premiums from financially squeezing their business, while also providing a robust benefits package for employees.

There is no single reason healthcare costs keep rising but there are many drivers contributing to the increases. Soaring prices for medical services, unhealthy lifestyles and a lack of transparency concerning prices and quality are all factors that contribute to the spike in premiums.

Employers may have more options for controlling their company’s healthcare costs than they realize, here are 3 strategies your clients can implement to minimize costs without cutting benefits:

  1. Self-fund healthcare costs
  2. Implement a telehealth program
  3. Offer Voluntary Benefits for purchase

By adopting these new healthcare benefits strategies and partnering with FreedomCare, your clients can lower their healthcare costs substantially. Give FreedomCare a call today.

3 reasons to self-fund health benefits under the ACA

3 reasons to self fund acaSelf-funding controls costs.

Under the ACA, fully insured carriers are facing higher exposure to claims without the ability to include rate adjustment factors for health conditions and demographics. New rules limit the insurance carriers’ ability to charge higher premiums for older, riskier individuals now that certain risk reduction strategies are not allowed. These costs will most likely be passed on to employers and individuals.

Self-funding keeps the employers best interest as the priority.

There are some fixed costs of administering a self-funded healthcare plan, such as claims processing, stop loss premiums and administrative fees. Self-funded employers only pay the direct costs of administering employee claims. If the employee base is relatively healthy, having a self-funded plan can be one of the best ways to manage rising costs. When employers choose to self-fund their health plan, they have access to all claims submitted, including Minimum Essential Coverage (MEC) plans. The claims administrator should be able to provide reports of what claims were paid and when they were paid.

Self-funding is customizable.

The costs of fully insured plans are unpredictable for employers since carriers have control over monitoring employee health and underwriting for risk. With fully insured plans, employers don’t have access to employee health claims which is a significant advantage of self-funded plans.

In conclusion, the ACA has changed the healthcare landscape. But your self-funded client will be better positioned to save on healthcare costs while providing a quality health benefit plan that meets or even exceeds the requirements of the ACA. Take advantage of our experience and quality products, give FreedomCare a call today.

Voluntary Benefits – A lifeline for the American worker

“Voluntary benefits have developed into a lifeline for the American worker, as employees seek to meet their needs for financial protection and benefits not provided as part of a group structure by employers.” - Rich Williams, senior vice president of growth markets at Colonial Life and Accident Insurance Co.

Voluntary Benefits - A lifelineIn a survey done by MetLife, nearly 40 percent of employees say a wide selection of benefits would make them feel more loyal to their employer, and 55.5% are willing to bear more of the cost in order to have a choice that meets their needs.

The top 4 Voluntary benefits for 2015 were:

  1. Life-Insurance
  2. Disability
  3. Dental
  4. Accident

With employee retention gaining importance to maintain the success of businesses, voluntary, employee-paid benefits give employers a way to offer a competitive benefits package without impacting their bottom line.

The problem is, voluntary benefit programs were previously primarily available to employees of large companies. Williams says, “Our research shows the concerns of their employees aren’t that much different than larger firms when it comes to personal finances. Employees in companies of all sizes tend to worry about having enough savings to retire, to cover an emergency or to cover being out of work if they’re injured or sick.”

Smaller employers no longer have to settle for small benefits packages. Here at FreedomCare, we have a large selection at different price ranges to fit an employer’s needs.

Telehealth – employee perk & innovative cost savings

Telehalth BlogTelehealth programs have the ability to connect patients with doctors no matter where they are located. Virtual visits, both by phone or online video chat, are more convenient and may be as effective as in-person doctor visits. Doctors and Therapists are able to diagnose and prescribe treatment without the patient having to leave their home.

The average number of telehealth visits per patient is 1.3 times per year. 5.6% of patients who used the virtual visits would otherwise have gone to an emergency department while 45.8% to urgent care. 83% of the conditions were resolved by a virtual visit. The most common diagnoses made during a telehealth visit are sinusitis, followed by cold/flu and UTIs.

These programs aren’t just convenient and cost-saving for employees. According to Modern Healthcare, “Advocates of the virtual-visit model argue that expanding access to telehealth services would reduce costs by heading off more expensive urgent care and emergency department care, and that consumers increasingly will substitute virtual visits for in-person visits.” This could mean fewer high-dollar urgent care and emergency room claims for an employer’s self-funded plan.

A 2014 Towers Watson survey found that 37% of employers planned to offer their workers telemedicine consultations in 2015, with another 34% planning to do so by 2017. FreedomCare has partnered with the leading telehealth providers to include unlimited 24/7 telehealth access, with many of our programs, to every employee at no additional cost. Give us a call to learn more.

Self-Funded Benefit Plans are on the rise.

Rise of Self funded benefitsWith the advent of the Affordable Care Act and skyrocketing healthcare costs, the concept of Self-Insurance is on the rise. It has been commonplace with large companies for some time but rare among small and midsized employers. So how does self-insurance work?

Self-funded health care has been described as an arrangement whereby an employer provides health or disability benefits to employees with its own funds.

Well, with health insurance costing close to $6,800 per employee per year, self-insuring your benefits can save you 12% or more. So if you have 100 employees, your insurance alone can cost $680,000 annually. A 12% savings would be $81,600. It seems like a no brainer at that point. What would your clients do with an extra $81,600 a year?

Because self-insurance allows an employer to break down virtually every component of their health care claims and administrative expenses, it allows for transparency to see the hard numbers and where all of those hard earned dollars are actually being used. This helps employers to plan better and allocate funds for certain contingencies.

Ask yourself 3 things if you want to self-insure your benefits plan:

  1. Do you want to save money?

  • According to ADP, the average monthly health plan premium rose 13.9% between 2010 and 2013, making a 12% savings hard to pass up.
  1. Are you compliant?

  • Employers still have to comply with the Employer Mandate portion of the ACA, not all companies offer compliant plans. FreedomCare offers the only 100% ACA compliance guarantee.
  1. Can you do this alone?

  • FreedomCare handles all of the details including administration, COBRA, paying claims, enrollment, etc.

According to the U.S. Department of Health and Human services, only about 26 percent of employers between 100 and 499 employees self-insure compared with more than 82 percent of employers with 500 or more employees. With no minimum participation, FreedomCare has made self-insuring possible for employers of all sizes, not just the large ones.