To self-insure, or to fully insure.
This isn’t what William Shakespeare had in mind with his famous question. However, it is what many employers face when deciding which benefits program best fits their employee’s needs. Many organizations opt for a fully insured health plan. In short, employers pay a fixed premium to an insurance carrier that pays covered medical claims. Some workplaces are considering self-funded plans. This is causing the percentage of self-funded plans to rise from 44% in 1999 to 65% in 2023.1
A self-funded health plan is an employer-sponsored plan for which the organization assumes the financial risk of providing healthcare benefits to its employees. Unlike its fully insured counterpart, self-funded plans operate by the employer and employees directly funding the cost of the plan. These plans gained peak popularity in the pandemic as employers looked for cost-saving measures without sacrificing their bottom line. This allows you flexibility to customize plans that meet your organization’s needs. Meanwhile, it also opens the door for high claims costs that can burden your budget.
If self-funding looks like the right plan for you, these ten cost-saving measures can help you boost your organization’s bottom line:
Invest in Stop Loss Insurance
Paying all losses and claims under a self-funded health plan can be daunting. One solution is stop loss insurance, or excess insurance. This provides protection to these employers on a reimbursement basis. Employers using this, work with an insurance company to reimburse claims costs exceeding a pre-established threshold. Examples of how unanticipated claims can add up quickly could include:
- Rare diseases that require treatment from specialists
- Emergency surgery after an accident
- Newborn baby requires an extensive stay in the neonatal intensive care unit
Stop loss coverage starts as soon as a claim exceeds an organization’s set attachment point. You can choose from two forms of stop loss insurance: specific and aggregate. In short, specific stop loss provides protection against a high claim on any one person. Aggregate stop loss offers employers a cap on the amount of eligible expenses they would pay during a contract period.2
Read Your Receipts
One of the best ways to optimize your self-funded health plan is to understand the data behind your claims. Your data can offer you two solutions in one. 1.) provide status reports on your current healthcare costs, and 2.) allows you to plan for recurring claims for next year’s plan cost.
Collecting, organizing, and evaluating claims data can be time-consuming for an employer. You may choose to work with a third-party administrator (TPA) to help provide administrative and claims services. In the end, the need for a TPA depends on your preference and your organization’s size.
See Who You’re Covering
Is everyone under your self-funded health plan eligible for coverage? If you’re unsure, then it may be time to conduct a dependent verification review, or DVR. This allows you to check who you are covering with your health plan. You’ll see who is eligible for the plan and can remove those deemed ineligible according to the plan’s criteria. A DVR could mean savings as high as 8% of total plan expenses, possibly resulting in hundreds of thousands of saved dollars.3
While some employers may prefer to do their own DVR, others can consult with an independent DVR service provider to help navigate this process. If you’re considering a DVR, click here to review a helpful checklist that can walk you through each step of the process.
Manage Drug Expenses
More than 131 million Americans (66% of the adult U.S. population) use prescription drugs. For further context, that’s an average of $1,432 per American in 2021. This explains how one in four adults taking prescription drugs report difficulty affording their medication.4
Employers can offer non-name brand medication as a cost-effective way to curb expenses. In fact, generic medications tend to be 80-85% less expensive than brand-name options.5
Remember Your Reimbursement Options
Reimbursement arrangements offer benefits that apply to both the employer and employee. These self-funded, tax-advantaged health plans can act as a stand-alone option for employers. If the plan meets certain requirements, it can reimburse employees for eligible medical expenses and individual premiums.
Some of the best employers keep the well-being of their employees a top priority. Click to learn more about how reimbursement arrangements can help you with your health plan.
Develop Educational Resources
Over 85% of employees report feeling confused about their benefits.6 A wide margin for error like this could result in the mismanagement of benefits and health plan funding. When employees understand their benefits, they can make better informed decisions about their short-term and long-term health goals.
Communicate employee benefits to your workforce and do it often. This could mean instilling routine messaging, lunch-and-learn opportunities, and online education options as a multi-channel approach to getting employees up to speed on all things benefits. And don’t wait for your next enrollment period to establish good practices today.
Offer Telehealth Services
Telemedicine use increased from 15.4% to 86.5% between 2019 to 2021, a direct result of the COVID-19 pandemic.7
Reasons behind this trend involve the wide availability telemedicine provides for employees.
Implement Wellness Programs
Instilling wellness programs, such as gym memberships and routine health scans, are effective methods for creating cost-effective guardrails for your health plan. How? Incentivizing employees to care for their health can potentially avert any underlying health conditions or concerns, allowing employers to prevent absenteeism due to an illness.
As a bonus to employers, those who use these programs can also see an increase in employee engagement, as well as recruitment and retention. Because when you invest in your employees’ wellbeing, they are more likely to remain happy and healthy in the workplace.
Ask for Feedback
Effective feedback is important for your organization because it allows your employees the ability to give you direction. From suggestions to constructive comments, you can better understand what’s working, what isn’t, and how best to improve for the foreseeable future. And, when regular feedback is part of your routine, employees can be 3.6 times more likely to be engaged in their roles.8
Partner with Trustworthy Providers
Never underestimate the value of having a trusted partner in your corner, helping you navigate the complexities of self-funded health plans and employee benefits. Depending on your provider, you’ll be able to rely on their year-round services such as benefits communication and guided enrollments to assist you in deploying your health plan.
This blog is up to date as of July 2024 and has not been updated for changes in the law, administration or current events.