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BENEFITS AND RISKS OF BEING SELF-INSUREDLINCOLN COUNTY COMMISSIONER ROB COFFMAN
AGENDA
Understanding Health Plan Self-Funding
Advantages and Disadvantages of Self-Funding
Individual v. Joint (Multi-Employer) Plans
Healthcare Environment Post – ACA
Questions?
Self-Funding treats predictable claim cost as expenses rather than insurable risk.
Under a Self-Funded plan model an employer determines the amount of risk appropriate for their organization.
Employers purchase Stop Loss Insurance to protect against unknown and unpredictable catastrophic claims.
Self-Funded plans are governed by Federal ERISA instead of State insurance laws.
Governmental agencies like counties and municipals, however, are also subject to rules from the State Risk Manager’s Office (RCW 48.62.011)
SELF-INSURING HEALTH PLANSUnderstanding Self-Funding
Purpose:
To provide financial protection to a Self-Funded plan sponsor
Provides protection against a catastrophic event or from abnormally high frequency/severity
Severe high dollar claims such as cancer, transplants and dialysis are considered “shock loss” claims
The Stop Loss contract insures the Employer not the Employee
The medical plan established by the Employer accepts the responsibility for paying providers claims but limits it’s risk with Stop Loss
SELF-INSURING HEALTH PLANSWhat is Stop Loss Insurance
Advantages & Disadvantages of Self-Funded Health Plans
Requires long-term commitment More internal administration More involvement in plan design decisions Must contract for claims, other services PPO discounts may be less than insurers' Increased fiduciary liability Variable financial risk Still subject to ever increasing cost of healthcare claims
(no magic bullet) Limits the number of experienced consulting brokers
available
Not subject to premium taxes Not subject to state benefit mandates No insurer profit margin built into rates No broker commissions on full plan Pay only for desired services Greater control over plan design Employer maintains claims reserves Access to claims data Full Credit for wellness savings Independent claims and disease management TPAs offer more services than insurers
Risk Management – Charges, Commissions and Retentions
A Self-Funded health plan can allocate more of each dollar toward payment of medical claims through eliminating commissions, risk charges and insurer profit.
Improved Cash Flow
Fully insured premiums are a form of pre-payment
Self-Funded plans pay as you go
Innovative Plan Document Design and Control
Freedom from state mandated benefit laws allows for flexibility in plan design
Benefits can be tailored to the working population
SELF-INSURING HEALTH PLANSWeighing the Benefits
Plan Sponsor’s Experience
Employer is responsible only for the risks presented by members of the plan
Risk Control
Stop Loss coverage can limit the employers risk while allowing it to retain control over claims and benefits
Value-Based Benefits and Wellness Programs
Flexibility to design health risk assessment & prevention and wellness tailored to the groups demographics
Improved Claims Data History
Software and investigative techniques can help curtail spending
Savings Opportunities
Utilization of cost containment features increases savings opportunities
SELF-INSURING HEALTH PLANSWeighing the Benefits
Chapter 48.62 RCW provides authority for local governments to individually or jointly self-insure health care, accident, disability, death, and salary protection benefits. RCW 48.62.011 requires prior approval for the establishment of every individual and joint local government self-insured employee health and welfare benefit program. RCW 48.62.071 requires that specific information is submitted to the state risk manager for program approval.
SELF-INSURING HEALTH PLANSSelf-Funding for Washington Counties
Individual (Single-Employer) Self-Funding
Must hold 8 weeks of total expected plan expenses in reserve
Report annually to State – Report Form is located on the Local Government Self-Insurance Program website
Aggregate Stop-Loss recommended
Joint (Multi-Employer)
Must hold 16 weeks of total expected plan expenses in reserve
Must also submit, as part of the Annual Report, prepared financial statement
In addition, audited financial statements must be provided to the State Risk Manager
Aggregate Stop-Loss required
SELF-INSURING HEALTH PLANSIndividual v. Joint (Multi-Employer) Plans
According to Pricewaterhouse Coopers data, the percentage of Self-Insured employers with fewer than 1,000 people in their health plan programs has almost doubled – from 29% in 2008 to 48% in 2010
According to 2011 Kaiser/HRET survey of Employer/Sponsored Health Benefits, 60% of companies Self-Insure their health benefit programs, up from 49% in 2000
DOL Confirmed Staggering Savings under Self-Funding
Deloitte Advanced Analytical Consulting Group was quoted in a recent Department of Labor (DOL) report that fully insured premiums increased by $808 while self-funding only increased by $248, a difference of 326% in 2011
SELF-INSURING HEALTH PLANSChanging Landscape of Self-Funding
Accountable Care Act
Health care reform was enacted March 23, 2010
Self-Insured plans are exempted from some ACA reforms that apply specifically to insurers such as medical loss ratio (MLR) standards, rating restriction rules, and insurer fees
ACA provisions specifically applicable to “small employers” range from: fewer than 26 employees for tax credit eligibility to 100 employees or less to qualify for exchanges
Self-Funded is cost effective at a time when traditional insurance is predicted to become more costly due to ACA.
SELF-INSURING HEALTH PLANSCurrent Healthcare Environment
1. State health insurance exchanges established
2. Medicaid eligibility expands
3. Large employers (50+ employees) must provide health plan or pay a fine
4. Individuals must secure health coverage or pay penalty tax
5. Automatic enrollment of full-time employees in an employer’s health plan required (200+ employees)
6. No pre-existing condition exclusion allowed
7. Waiting period limited to 90 days
8. Cost-sharing amounts capped and annual limits removed
9. Maximum health premium discount for wellness program participation increased from 20-30%
10.Group health plan must report coverage by individual to IRS
11.Self-Insured plans will have to maintain certain levels of coverage in order to meet the threshold of a qualified health plan
12.Non-discrimination rules will apply to fully-insured plans
SELF-INSURING HEALTH PLANS2014 What to Expect
SELF-INSURING HEALTH PLANSQuestions?
Rob CoffmanCounty Commissioner
Lincoln County509-725-3031
Dan Fisher, CEOEmSpring
