Is self-funding the answer to all the Affordable Care Act's best intentions, but ultimate quagmires for medium to large employers?
With the recent passage of the ACA many employers are experiencing anxiety over rising costs, increased regulations, and frankly: fear of the future unknown. In addition, the grandfather rules have resulted in even more uncertainty.
Those are huge questions facing many employers and their health benefit consultants/ agents/ brokers as we enter 2011. According to the Kaiser Family Foundation 59% of covered workers were in self-funded plans in 2009. For those still purhcasing traditional health insurance it may be time to consider other alternatives.
Many of the PPACA's new requirements apply to self-insured plans, as well as to plans funded by insurance products. For example, the new restrictions on lifetime and annual limits, waiting periods, and pre-existing condition limitations apply to both self-insured and fully insured plans, as do the new requirements expanding coverage for adult dependent children.
Given that, however, self-funding may provide some cost savings as the health insurance landscape alters and puts more emphasis on business efforts to realize health insurance savings.
But, self-funding is not a one size fits all solution. According to Self-funding Magazine, self-funding health insurance generally makes sense for businesses with more than 100 employees and also allows them some additional control and decision-making on coverage options.
The Coming Market Change
Since the HIE's are going to provide health insurance for employers with less than 100 employees, could it be that the health insurance market outside the HIE's will be entirely self-funded? What would that mean for brokers, agents, consultants?
To this point, I have not seen this market change mentioned by any national experts, surely others have thought of this before I have?
Another possible outcome, will businesses in the 80-99 employee range start considering self-funded options and taking a very close look at the strategy. Would competition get even more fierce bewtween benefit consulting firms, brokers, etc? You bet.
Meeting the Market Need
Then, how can those firms, agents, and brokers set themselves apart in attracting those clients who look to transition to self-funding? I always come back to value-added benefits and services. What can they give clients, that others cannot.
I argue there are several means to enhance client health care value purchasing with add-on services such as: wellness programs, lean purchasing strategies, and health risk assessments, etc.
Details
- Wellness Programs: These are trendy, but for good reason. There are incentives in the ACA for employers to start new wellness programs. See this: Wellness program incentives for more information.
- Lean Efficiency Strategies: I firmly believe this is where healthcare, and therefore where health care purchasing need to go. Self-funded employers, by definition, have more control and quality health benefit consultants can help. These employers have a huge financial stake in ensuirng value for their healthcare dollars. It make sense that they focus on contracting with networks of providers focused on lean provision of healthcare.
- Health Risk Assessments: Both of the above strategies should create health incentives for individual employees to improve their own health status. A key way to do this is by adding a routine, 100% covered benefit of a health risk assessment. See this for more information on: health risk assessments.
Other benefits
The above strategies can play a huge part in creating better health care value for your clients. Adding those ideas above the change to self-funding can provide major cost savings. Self-funding by itslef has some inherent savings when you consider the following.
Self-funding can save the business a substantial amount of money in some cases. Some estimates say that a business could save as much as 25 percent by using this method. To save money, it helps tremendously if the workforce is relatively healthy. Therefore, if your business has a majority of older workers, this may not work out as well. When you utilize this type of insurance, you are not going to pay any health insurance premiums. You will have to pay something for the stoploss insurance, but it is going to be very affordable compared to regular health insurance.
Another benefit of this type of health insurance is that the employer gets to decide what type of services are going to be covered. The employer does not have to rely on an insurance company to tell them what is going to be covered and what is not. For example, the employer will get to choose whether employees get preventive care such as mammograms or checkups. Not having to answer to someone else in regard to healthcare can be a big benefit for many business owners.
Possible drawbacks
However, there may be some potential drawbacks to consider. Even though this type of insurance can be beneficial, there are a few drawbacks to consider as well. For example, if your workforce is not that healthy, you could potentially end up spending quite a bit more than you would with a regular insurance plan. If several customers had to have a lot of medical care over the long-term, you might end up paying quite a bit of money for these bills.
Another drawback of this type of plan is that it requires discipline. It would be very easy for a struggling business owner to get into the funds from this type of account in order to avoid going out of business. Then when medical costs are incurred by employees, the money might not be available.
