Should You Consider Self-Funding Your Employee Health Plan

Healthcare reform is driving more and more organizations to consider self-funding as a more effective and affordable alternative to traditional fully-insured employee benefit plans. How do you know if a self insured plan could be right for your organization? Here are 4 simple questions to ask yourself…

1. Have your healthcare costs increased?

Any time costs rise for a product or service you utilize on a regular basis, it’s time to review your options and look at what else is available. Could you get the same, or better, service from another vendor at a lower rate? Could you potentially reduce costs in other areas of your health plan with a different partner and a different type of plan? An unexpected increase in healthcare expense is one of the first signs that self-funding might be an effective option for your plan.

2. Do you know why your healthcare costs have increased?

While rate increases and a jump in healthcare costs will drive you to research alternatives, to make an informed decision you need to look under the covers and gather more data. It’s about more than premium costs alone – it’s about plan transparency, management and addressing the reasons why your costs are going up. A rate hike shouldn’t just be an accepted norm every year, if you can’t get the specifics on why – along with a mitigation strategy to manage costs – it’s time to consider self-funding.

3. Have you increased your employees’ monthly contributions?

Many health plans will advise you to increase employee contributions to offset higher healthcare costs, but that’s not necessarily the best solution. Some plans increase rates simply because they can – increases that are passed along to your employees and result in unhappy associates who are paying more and getting less. Wellness programs and disease management initiatives can be highly effective in reducing plan costs. When these programs are part of a self-funded plan managed by an experienced third party administrator (TPA), those savings are returned to your plan and can reduce the need for contribution increases.

4. Have you increased your plan’s deductible, co-insurance, co-pay and out-of-pocket to offset increased cost?

When you continually increase deductible, co-insurance, co-pay and out-of-pocket requirements, you are attacking the symptoms, not the cause. These costs will just keep increasing because you haven’t addressed what’s driving them – an ineffective health plan that enables unhealthy plan members and continuation of ‘at risk’ behaviors. When these kinds of ‘across the board’ increases occur, a move to self-funding makes the most sense. You’re already experiencing some of the considerations of self-funding, only you’re not getting any of the rewards.

When you truly move into a self insured plan, managed by a TPA, you’ll discover what your true plan costs are and why. Your TPA administrator will build an individualized program to monitor and manage both cost and quality. Even better, any savings generated are returned to your plan’s risk pool, not your insurance company.