The costs of pre-boxed, fully insured group health plans have been steadily rising during the last 20 years. In that time, premiums have more than tripled and workers have been asked to take on a larger share of the payments. Through it all, a general grumbling around healthcare solutions continues across dinner tables, in boardrooms, and on social media.
The good news for those looking to control quality and costs is that an alternative way to provide health insurance to employees – in the form of self funded health plans – already exists. While 83% of larger companies already use fully or partially self funded health insurance, 87% of smaller businesses haven’t yet figured out how to control heathcare costs by implementing self funded health insurance.
In fact, a lot of smaller companies still have no idea that the option of self funding exists. And among those who already possess a level of awareness surrounding self funded health insurance, it’s probable that their current knowledge is fraught with misperceptions.
These myths and misperceptions about self funded health plans can keep you from exploring an innovative, flexible and cost-effective way to put your company – and not an insurance company – in the driver’s seat.
Myth #1 – Self Funded Health Plans are Way Too Risky
Imagine self-insuring your car instead of paying an insurance company to do that. You’d be the one to pay the costs of any damage you do to the health and property of others. If that sounds too risky, you’d be right. So, when the term “self insured” or “self funded” is applied to group health insurance, it’s natural to assume the same—until you learn a little more.
Companies that self fund incorporate stop-loss insurance into their plans. Stop-loss insurance caps a company’s financial risk at a predetermined level.
Myth #2 – Only Really, Really Big Companies Have Self Funded Health Insurance
In the past, that was true. One reason why was – with limited demand for self funding – few insurers were willing to offer stop-loss insurance to small and midsized companies. However, with rising rates on traditional health insurance and the introduction of the Affordable Care Act, things quickly changed. Smart insurers and Third Party Administrators (TPAs) started creating tailor-made products for companies interested in self funding, regardless of company size.
Today, many small and mid-sized companies have effectively said goodbye to bouncing around from one big insurance company to the other in search of lower rates.
Myth #3 – Self Funded Health Plans aren’t as Good as Fully Insured Plans
While self funded health plans and fully insured plans have all of the same parts, the ability to put those parts together in the way that best suits your company is a quality-raising, cost-saving game-changer. When a company self-funds, it has the opportunity to:
- Design a unique healthcare plan that meets its specific needs and the unique needs of its employees
- Say goodbye to state-mandated benefits and choose what health conditions to cover
- Get instant savings on taxes and decreased operational costs
- Make plan decisions based on actual claims data
- Save money or add value to the healthcare dollars that are already being spent
Myth #4 – Companies Uncomfortable with or Operationally Unable to Pay Claims as They Come In Shouldn’t Incorporate Self Funded Health Plans
What’s so great about self-funding is that you get to choose how you fund your group plan. And there are several options. Every mid-sized company needs to take a hard look at one of those options in particular: level-funding. Instead of paying claims as they come in, you pay a set-in-stone rate (1/12 of your max annual cost) each month. That way you don’t have to worry about not knowing what you’ll have to pay in claims. Yes, just like a fully insured plan except you still get all of the benefits of a self-funded plan, AND any claims dollars your employees don’t spend are returned to you.
Myth #5 – Even with Level Funding, There’s No Good Way to Keep Claims Costs Down (and Get Money Back)
One way to reduce your healthcare costs with the added bonus of increasing employee satisfaction and productivity at the same time is to incorporate direct primary care (DPC) into the healthcare plan. For a flat monthly fee, your employees have direct access to a primary care physician. No claims need to be sent to an insurance company, which means a reduction in work all around.
In addition, direct primary care physicians can take care of 90 to 95 percent of a patient’s health issues. Your company can save 20 to 35 percent on healthcare claims – which can add up to hundreds of thousands of dollars – simply by reducing employee use of emergency rooms, hospitals, specialists and other expensive services.
That’s because with DPC, your employees get 24-7 access to their primary care doctor via office visits, phone or video visits.
DPC also offers same-day visits, no copays, low-cost labs, unlimited routine family medicine procedures and a doctor who is motivated to keep costs down and quality high because their business depends on it — now that’s worth asking about.
Myth #6 – Healthcare Insurance is So Confusing; We Can’t Handle Self Funded Health Insurance
The good news is most companies don’t have to; instead, they work with TPAs (Third Party Administrators). TPAs take all or as much of the responsibility for designing and administering a self-funded plan that a company wants them to. Even after hiring a TPA, operational costs will likely be less than the operational costs paid to a big-box insurance company that gives no control over your claims costs.
Myth #7 – Self Funded Health Plans Didn’t Work 10 Years Ago; They Won’t Work Now
A decade ago, forward-thinking midsized companies chose to self-fund when the insurance products were mainly meant for larger companies. Some of those midsized companies had a bad experience because the products simply weren’t right for them at the time, and no other choices existed. Today, the self funded market is far more mature – with multiple products designed to help small-to-midsized companies safely take control of claims costs while providing employees with the quality care they deserve.
Whether you know little about self-funding or haven’t thought about it for a few years, it’s time to give this group health plan option a long, hard look. It just may be the alternative you’ve been waiting for.
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