Many HR Directors believe that self-funding is only an option for larger companies with at least 250 employees, that the administrative burden is too much, that it could negatively impact employees’ provider coverage, or that the plan would be exposed to too much risk.
There are numerous misconceptions about self-funded plans. I know this all too well because, as an HR Director, I was overwhelmed with the contradicting opinions floating around out there.
To dispel some of those myths, I would like to share my own personal experience with self-funding.
SELF-FUNDING IS TOO MUCH WORK FOR EMPLOYERS: MYTH
As an HR department of one, the thought of taking on additional tasks related to plan administration seemed daunting. I wasn’t sure how to go about ensuring the plan met all the federal mandates, managing the plan, collecting co-pays and premiums, and paying claims.
Much to my relief, I discovered that there are Third-Party Administrators (TPAs) who work with self-funded employers. The TPA handles all those day-to-day administrative tasks.
SELF-FUNDED PLAN BENEFITS ARE INSUFFICIENT: MYTH
Benefits packages play a critical role in attracting and retaining top talent.
I was concerned that a self-funded plan wouldn’t measure up to a traditional plan. I thought that the “self” in self-funding meant that the employees would bear the burden of paying their own medical costs.
This is not the case.
Self-funded plans are designed much like traditional plans with structured co-pays, deductibles, co-insurance, and out-of-pocket maximums.
I worried that there wouldn’t be a provider network and that their current providers may not accept our self-funded plan.
However, the TPA will have an established provider network. They can also navigate provider network contracts to add providers and ensure a broad network.
SELF-FUNDED PLANS SHOULD NOT BE CONSIDERED DUE TO THE INHERENT RISK: MYTH
With the rising cost of healthcare, claims can be costlier than anticipated and most major claims are unexpected.
Self-funded plans provide increased cost control. But I didn’t know how to budget for claims or what would happen if unexpected high-cost claims occurred during the year.
This is where stop-loss insurance comes in.
Your TPA can help you purchase stop-loss insurance to reimburse you for claims that exceed a predetermined threshold. They can also analyze claims data to identify health issues that are driving your claims costs.
Using this claims information, they can help implement health and wellness education programs for members with chronic conditions such as diabetes, stroke, or cardiovascular disease. These programs provide individualized, goal-oriented care, and help reduce the risk of preventable medical conditions.
These programs lower claims exposure and can also improve the overall health and wellbeing of employees with chronic conditions.
Since self-funding our plan in 2015, we have experienced significant cost savings on our employee healthcare benefits.
We were able to share these savings with our employees by lowering premiums and deductibles. At the same time, we are still providing coverage that meets the needs of our employees.
I contribute our success to having the right partners in place to assist with plan administration, coordinate stop-loss insurance coverage, navigate provider network contracts, oversee claims review services, and our commitment to investing in disease management.