Managed Benefit Plans - Self Funding

THE ADVANTAGE OF SELF-INSURANCE

Migration from Fully Insured to Self-Insured

Self-Insuring can be an effective method of providing good benefits and service, in a manner that allows the employer to have some control over the associated costs.
28% of Individuals covered by Fully-Insured or HMO Plans in 2001-2002 are now in Self-Insured Programs.
Continuing increases in Migration Trend
Increase in State Mandated Benefits
Managed Care patient dissatisfaction
Provider contracts are changing
Ability to better manage employer’s expenses
A shifting of the decision to Self-Insure from the Human Resources to the Risk Management departments.

Cost Savings

Lower Cost of Operation: Employers frequently find that administrative costs for a Self-Insured Plan administered through a TPA are less than those charged by a fully insured option through an insurance carrier.
Carrier Profit Margin and Risk Charge Eliminated: These costs are either completely eliminated or substantially reduced; depending on the level of excess coverage’s purchased by the employer.
Improved Cash Flow: Employers may see improvement when money previously held by the insurance carrier in the form of various reserves is freed for use by the employer – employer is not pre-paying coverage.
Elimination of Most Premium Tax: The employer does not incur this expense for the portion they self-insure. This can be as much as 5% of premium paid.
Return on Investment for Reserves: The money established for reserves are under the employer’s control and interest generated from these monies is for the employers benefit.
Risk Management Efficiency: Employer may decide the amount of risk to retain, and the amount to transfer through a Stop Loss Coverage.
Funds may accrue to the benefit of the employees: May be used to offset future increases, add benefits, expand coverage, in escalating cost periods, easier to restructure, more options for employer to consider to hold down cost increases.

Favorable Regulation under Federal Law

Allows control over Plan Design: This is an advantage that will have the greatest impact on improved costs for medical benefits evaluation; a real Risk Management tool to mitigate losses.
Avoids Mandatory Benefits: Self-Insured Plan are not subject to state regulations, fully insured plans are. In the current legislative environment, this has had a substantial and adverse economic impact on employers.
Significantly Mitigates Liability for Employee Lawsuits: Due to Federal regulation, suits must be filed in Federal Courts. There are a limited number of Attorneys that can practice on the Federal level, and few of these will take these types of claims.

Favorable Administrative and Service Benefits

Effective Claim Management: Third Party Administrators (TPA) are evaluated primarily on their ability to provide fast, efficient and accurate claims service supported by their cost containment capabilities. This benefits the employer through reduced claims costs and provides improved services to the employees.
Managed Care Services: The employer may take use of a number of resources either provided through the TPA, or contracted separately. These services are designed to support and improve the claims administrative function. They can include utilization Review, Large Case Management, hospital Bill Audits, access to Preferred Provider Organizations, Preferred Tertiary Care networks, and other additional programs.
Eliminates Employers Dependency on Insurance Company’s in House Programs, if they have them provided.
Employee Tailored Administration: Willingness of TPA’s to provide services to meet specific employee needs, in addition to the employers.
Gain Efficiencies in Administration through Consolidation of Multiple Plans.
Enhance and Gain Access , remove Redundancies; ‘Capacity to control own Destiny’!
Use Funds for Benefit of Employees instead of paying premium increases.