Employer Tips for Self-Funded Health Care

March 19, 2013

There is a world of insurance options available for employers. With the changing face of health care due to the passing of the Patient Protection and Affordable Care Act, and with the ever-rising cost of health care, employers are looking for new ways to provide health insurance to employees.

Self-funded health care is one way employers are taking control over premium expenses and vendor fees. According to Wikipedia, self-funded health care is a self-insurance arrangement whereby an employer provides health or disability benefits to employees with its own funds. This is different from fully insured plans where the employer contracts with an insurance company to cover the employees and dependents.

When choosing a self-funded health care plan, an employer is able to purchase excess insurance coverage called employer stop-loss coverage. This coverage helps protect employers from extreme utilization levels and claims. When obtaining employer stop-loss coverage, employers may need to provide the following to an insurer:

  • A census of covered employees (noting age, gender, dependent status and location)
  • Claim history, with two years of group-level history and two years of individual catastrophic claims history.
  • Current and proposed plan of benefits

The passing of the Patient Protection and Affordable Care Act (PPACA) also affects employers choosing self-funded health care. As with any updates in health care offerings, there are pros and cons under the PPACA to offering self-funded health care:

Possible Advantages

Avoidance of State Requirements

Self-funded plans are not subject to state-mandated benefits – only federal mandates. The exception to this rule is government or church plans where mandates and other state rules may apply. Federal taxes and state premium taxes are also avoided by having a self-funded health care plan.

Flexibility

With self-funded plans, the lower the current costs, the less overall impact on the plan over time. Self-funded employers can adapt their targeted cost containment with additions like wellness programs.

Avoid Higher Inflation

Fixed and variable costs for self-funded plans are expected to stay lower than premiums for fully-insured plans. Self-funded employers can look for more attractive self-funded options driven by carrier interest as carriers favor self insurance as it limites their overall exposure to the medical loss ratio.

Potential Disadvantages

Incomplete Protection:

Self-funded plan sponsors and participants won’t enjoy some of the protective features of the new PPACA law including the reform law obligation to renew all current insurance policies each year, the guaranteed issue rule and the federal and state premium oversight health reform rules. Note: stop-loss carriers and reinsurers are not subject to these laws or regulations.

For more information on self-funded health care plans and its relationship to the PPACA, visit SHRM and HUBInternational. To discuss your health care options and to get help navigating the ever-changing world of health care for your business, please visit Kare360.

Topics: Business Operations, Content Type

Mike Martin

The Karis Group

Mike was born, raised and spent a large portion of his professional career as a healthcare CEO in Baton Rouge, Louisiana before moving to Central Texas in 2003. He achieved success as a senior-level executive in several different industries and career paths but most enjoyed those that afford him the opportunity to make a positive impact on peoples lives. The attainment of a Bachelor of Science and Masters in Public Administration degree from Louisiana State University after completing military service was the foundation for Mike’s life-long career of service to others. After serving in the administration of Louisiana Governor David Treen, he began a career in healthcare as the CEO of a regional, non-profit, cancer treatment, research and education center. It was during these years that his passion for the patients led him to champion causes for quality, affordable patient care – regardless of ability to pay. Mike’s experience as a seasoned healthcare executive coupled with a real desire to serve others led him to The Karis Group in January, 2010. Having witnessed the devastation that the incongruences in healthcare pricing structures, reimbursement mechanisms and collection systems have on the average family in America, Mike saw an opportunity to “have a transformational impact on peoples’ lives” through the products and services offered by Karis. Mike resides in Georgetown, Texas with his wife of over 33 years, Mary Beth. His spare time is devoted to involvement in his church and community service.
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