What questions should employers ask a carrier?
Make sure the carrier you’re considering is totally transparent about its fee structure. A lot of carriers have access fees, the price to use their provider network. Some disclose it, while others hide it as a claims cost. In today’s market, a lot of carriers put it in their claims expense. Many employers don’t even know it’s there. Employers need to ask, ‘What is your access fee? How much does it cost to use your network? Do you charge for that, or is it in your administrative fee?’
Employers considering self-funding need to determine how much risk they want to assume. There are a number of ways to work through stop-loss coverage, allowing groups to cap their out-of-pocket expense.
What risk protection is available for self-funded plans?
There are a couple options for stop-loss protection for self-funding. With specific, you set it at a specific amount, and with aggregate, it’s based on a percentage of your claims.
Specific sets a set dollar amount based upon how much a member uses in any particular year. Stop-loss coverage takes everything above that. If an employee has a $1 million claim, the employer is only responsible for $75,000. Aggregate is about capping annual variable costs. If your claims are projected to be $1 million, with a 125 percent aggregate, you know your worst-case variable cost is $1.25 million.
How can executives determine which plan is right for their company?
Get an assessment of the overall health and well-being of the work force. Most employers go to self-funding because they believe there’s a potential cash flow advantage. They are predicting that their work force is healthy, so their claims expense on its own will be less than paying into a pool.
An employer paying into a pool may implement a wellness program or nonsmoking work environment to help overall employee well-being, but it takes just about everybody in that pool to participate to impact the rates.
However, with self-funding, if employers want to drive wellness, they can see the fruits of their efforts in claims experience for which they are directly accountable. They have a better opportunity to control future health care costs by self-funding and doing these other things around it to make the program more consumer-centric and engaging to their work force. That’s the tradeoff for assuming the risk.
Don Whitford is vice president of sales at Priority Health. Reach him at (248) 324-4711 or [email protected].
