Self-funded health plans can be a cost-effective solution for employers to lower their healthcare costs as it allows them the ability to better target employees who pose the highest risk of developing chronic diseases that result in increased health claims.
Self-Funded Health Plans vs. Fully Insured Health Plan
In a self-funded health plan, an employer is able to retrieve detailed claims data and identify the population of employees that are causing the increase in the company’s overall healthcare costs. Although federal regulations prohibit employers from singling out individuals, they can obtain aggregated information documenting how many employees are driving health costs and their health conditions. This information can then be utilized to develop wellness programs that are geared towards helping employees make better health, behavioral and lifestyle decisions that result in healthier outcomes. For example, a self-funded employer will be able to identify if an employee population is not compliant with their maintenance drugs for high blood pressure or cholesterol. By providing an intervention early on, such as integrating a targeted wellness program, it can help prevent these individuals from ending up in the ER with more serious problems.
Unlike a fully insured health plan, self-funded employers have control over every aspect of their benefit strategy. In a self-funded plan, an employer can decide what the employee contributions will fund. For example, an employer who wants to implement a wellness initiative can structure employee contributions to incentivize employees to participate in the wellness program or a further step of developing a results based contribution strategy. This can include biometric screenings, health risk assessments (HRA) and wellness coaching from a third party vendor.. The goal is to reach a percentage of possible high-cost claimants and the ROI is more definable and immediate to self-insured plan sponsors.
Benefits of a Self-Funded Health Plan
A self-funded plan has a positive impact on an employer’s cash flow because money collected from premiums is only paid out when claims occur. By lowering health claims like employers might do through their wellness strategies, that money would go back into the reserve to accrue interest. With a fully-funded plan, employers pay a fixed premium, regardless of the claims experience during that given plan year.
Manage risks of Self-Funded Health Plans with Stop-Loss Insurance
More employers today are turning to self-funded plans because it offers more potential cost benefits than traditional group plans. However, there is some risk in managing employee claims. A higher than expected number of claims could result in the employer paying more. To limit these risks, an employer should be carefully monitoring the claims data to determine what is causing health claims to rise and then take action by integrating a wellness program. In addition, to limit such risk, there is stop-loss insurance coverage that protects employers from paying more. Stop-loss insurance kicks in and pays employees’ medical bills after the employer has paid a certain predetermined amount.
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