Today, employers are turning every
stone to find ways to reduce health care
costs that continue to rise. One way to create savings to offset the general medical
costs is through dental and vision plans.
Moving current dental and vision plans to a
self-funded program can save employers anywhere from 10 to 20 percent in health care
costs, says Brenda Fagan-Johnson, employee
benefit specialist with Westland Insurance
Brokers. Essentially, you are cutting out the
overhead and profit that a fully insured carrier must include in its rates.
There is very little risk involved with self-funded dental and vision plans, so it is a great
way for employers to test the self-funding
process and determine the benefits it can
provide their business. Dental and vision are
the most profitable plans for insurance companies because there is so much money left
in reserves at the end of the year, says Fagan-Johnson. Self-funding such plans will save
employers much-needed funds.
Smart Business spoke with Fagan-Johnson about the benefits of self-funding
dental and vision plans, the risks involved
and the operation process.
How is a self-funded health plan administered?
For self-funded plans, an employer hires a
third party to process claims and administer
the plan. The most cost-effective pricing is
generated by putting the dental and vision
benefit into one plan. That keeps your administrative costs at a minimum.
What is the difference between a self-funded
vision and dental plan compared to a fully
insured plan?
The self-funded vision plan is a reimbursement program. You may utilize any licensed
eye care provider. A typical vision plan would
reimburse an employee $50 for an exam and
$100 for glasses or contacts. This level of benefit matches plan designs offered by the fully
insured market but at a much lower cost.
A fully insured PPO dental plan costs
between $30 and $40 a month for single coverage. The self-funded dental plan with the
same benefit level runs between $15 and $20,
including the administration fees. Vision programs are approximately $6 to $10 per
employee per month. The monthly cost for a
self-funded vision plan for single coverage is
in the $2 to $3 range.
Why are employers taking advantage of and
implementing self-funded plans now?
By moving dental and vision to a self-funded plan, employers automatically save 10 to
20 percent overhead that a typical insurance
company would have to charge to make a
profit. There is no additional work involved
for a busy business owner because a third
party funds the claims and handles employee
requests. The business owner simply funds
the claim.
Self-funding does not limit employees as
they are permitted to visit any doctor they
wish and receive the same coverage they
would if they were covered by a fully insured
program. You may use any dentist including
dentists in Mexico along the border of San
Diego. As a growing number of Americans
use dental services in Mexico, it is important
to utilize plans that include such coverage.
Many dentists in Mexico have been educated
and trained in the U.S.; therefore, quality care
is not a problem.
Are all business owners qualified to self-fund
dental and vision plans?
All are qualified, but it is not beneficial
unless you have 50 or more employees. You
do not need to have a large pool of money or
reserves to self-fund dental and vision plans.
Dental and vision are very limited benefits
and have a cap of liability per person, per
year.
While all self-funded plans are often a benefit for employers, it is a great idea to start
with dental and vision plans as they carry less
risk and are a great opportunity to become
comfortable with the plan.
Do you believe that business owners will
start implementing self-funding for basic
medical coverage, as well?
It is very common for companies who start
out with self-funded dental and vision plans
to get very comfortable with the plan and the
process and look into self-funded medical
plans. They learn how to evaluate the trends
of the coverage they are providing and project the needs in the future. They often realize
it is very easy to implement and operate. One
of the biggest aspects that employers appreciate is they can see where every dollar they
spend is going. There are no hidden costs
that are often found with insurance companies or operating costs.
Will employees notice a change in their coverage if the plan becomes self-funded?
No, there should not be any difference in
the care and coverage received by the
employee. Often, we hear employees saying
that they like the programs because claims
are processed quicker. Typica insurance
companies are in no hurry to process claims
because they like to keep the funds in their
accounts for as long as possible. With self-funded plans, claims are paid weekly.
Doctors enjoy self-funded plans, as well.
Employees can still visit any physician
they wish with self-funded plans, and
employers have the option to design their
own plan.
BRENDA FAGAN-JOHNSON is an employee benefit specialist with Westland Insurance Brokers. Reach her at (800) 541-0711 or
[email protected].
