Self-funded health plans provide customization, control and cost savings

Traditionally, self-funding was a better fit for privately owned companies with more than 100 employees and a tolerance for risk. That’s changed.

With the Affordable Care Act (ACA) and its mandates for benefits and essential coverage, third-party administrators (TPAs) and stop-loss carriers have created solutions geared toward the smaller market segment.

And while smaller employer groups are aware of the concept, many haven’t looked into how it’s relevant to their population until the ACA’s transitional relief ran out.

“Over the past month, the fully insured carriers have rolled out the 12/1 renewals to the 51 to 99 employee market segment, so we’ve seen a drastic increase in quote volume because they now have figures in front of them of what a fully insured option would look like,” says Abbe Mitze, account executive II at HealthLink.

Mitze says with the self-insured market, you can use health as a determining factor, which isn’t the case for many fully insured plans under the ACA.

Smart Business spoke with Mitze about the benefits of self-funded health plans that are appealing to more employer groups.

Is lower cost the biggest reason for employers switching to a self-funded plan?

Yes. The No. 1 factor for an employer group to select a solution — whether fully insured or self-funded — is cost. After health premium, the next most important factor is the network of doctors and hospitals.

Since self-funded plans aren’t subject to certain ACA taxes and mandates in regards to benefit coverage, in general the premium is lower in a self-funded solution.

Also, the healthier your population, the better chance you’ll reap greater rewards by moving to a self-funded solution.

How does self-funding enable more flexibility?

You can customize from both a network or plan design perspective.

In a self-funded solution, you pick the best vendors in the market for your plan. With the help of your insurance adviser and TPA, employers choose a pharmacy benefit manager, disease management coordinator, organ transplant writer, etc., who deliver the most cost contained care that is the best fit for the employee population. However, with fully insured plans, the model is turnkey; there’s no flexibility to customize.

Although all plan designs are subject to some ACA mandates, self-funded employers have the ability to keep traditional plan designs, like two times deductibles and a three-tier pharmacy option. Many fully insured carriers have moved to three times deductibles and a six-tier pharmacy program. In a self-funded solution, you can make that decision for yourself.

What control does self-funding provide?

It’s all about transparency. You have full access to all claims information; you know where your health care dollars are being spent and who is utilizing the plan. Using this data, you can make educated decisions on your benefit design, your employee offerings and how to proactively steer spending.

These reports are why you need a very consultative insurance adviser who can guide you, as part of a self-funded solution.

Why do some companies hesitate to go self-funded? What do you tell them?

The risk is an obstacle for many. However, even in a self-funded solution, you have stop-loss insurance, so your risk corridor is outlined. You know ahead of time what is the worst-case scenario or maximum exposure. You can put together the type of contract and stop-loss attachment point where you’re comfortable with the risk.

Another concern is that when you go self-funded, you will be declined from fully insured plans in the future. This risk has decreased significantly because health is no longer a determining factor in underwriting for more and more plans. Starting in 2016, this includes employer groups that fall into the 99 and lower market segment.

Also, keep in mind that a level-funded or partially self-funded plan can bridge into self-funding. These plans look and act like a fully insured plan, where employers pay a flat monthly premium. But if there is excess money, employers potentially get a payout after their plan-year ends.

If you aren’t already exploring the advantages of self-funding for your health plan, it’s time to start.

Insights Health Care is brought to you by HealthLink

How to help employees with chronic health conditions

Living with a chronic condition is a reality for many Americans. estimates that more than 125 million Americans live with at least one chronic illness. It is predicted that by 2020 that figure will rise to 157 million Americans.

The National Center for Health Statistics defines a chronic disease as any illness that lasts three or more months. The most common chronic conditions include heart disease, diabetes, kidney disease, autoimmune disorders, lung disease and multiple sclerosis.

For many, living with a chronic condition means living as much of a “normal life” as possible, and that would include being part of a workforce.

“Living with a chronic illness is especially difficult for persons who need to work every day,” says Debi Vieceli, RN, a cardiac care manager for UPMC Health Plan. “Employers need to know how they can help employees as much as possible to lead normal, productive work lives.”

Smart Business spoke with Vieceli about ways that employers can help their employees with chronic health conditions.

How should an employer assist an employee who has a chronic condition?

First, you need to recognize the fact that a chronic illness can disrupt a person’s life. It can affect a person’s appearance, their physical abilities and independence. The employee might be tired quite often and in pain.

Among the things an employer can do is to encourage employees with chronic conditions to seek out support groups, where they can share experiences and learn about coping mechanisms. If possible, an employer could enable such a group to be established in the workplace, or facilitate communication between employees who live with chronic conditions.

How do chronic illnesses affect your health care costs?

Seventy-five percent of health care costs are driven by lifestyle-related chronic illnesses. That’s why it’s so important to use case management, wellness programs, and health and productivity solutions to manage these employees and their related health care claims.

What kind of advice can an employer give to employees with a chronic condition?

It’s essential that persons with chronic conditions be personally involved in their own treatment.

Becoming an active participant in your treatment is one way to decrease the stress of the situation. Exploring treatment options and developing relationships with caregivers is also a positive step for a person with a chronic condition.

Following a healthy diet is important because good nutrition can result in better health. Those with chronic conditions should follow all special dietary instructions and be aware of the food decisions they make on a daily basis.

Are there tips that make sense for a person with a chronic condition?

For everyone, exercise is important, but that is especially true for persons living with chronic conditions. Walking or working out at a gym is good for the whole body and being able to do this can help you to feel better about yourself.

Remember, before starting any exercise program, talk to your doctor about what works best for you and what would help you develop a proper level of fitness.

Because people with chronic conditions are usually on a medication regimen, it’s always good to develop some sort of reminder system. This will enable people to be sure they are taking the right medications and at the right time.

Nothing is more important to a person with a chronic condition than making healthy choices. To prevent the exacerbation of existing chronic conditions, you need to stop smoking, eat a healthy diet and get regular exercise.

Insights Health Care is brought to you by UPMC Health Plan

How to help employees get the most out of their health benefits

When employees understand their health costs, it can save your organization money. Studies suggest, however, that most consumers with health coverage don’t fully understand their health plans.

“Employees need to understand what their insurance plan covers and what it doesn’t,” says Amber Hulme, Medical Mutual Vice President, Central and Southern Ohio. “With the right information, they can reduce health care costs for themselves, as well as their employer.”

Smart Business spoke with Hulme about what employees must understand about their health care coverage, how common misconceptions can affect medical costs and what simple steps can make the most difference.

What resources can help employees better understand their benefits?

There are two key documents your employees should know. First, all employees get a benefit book or certificate of coverage, which explain what medical services are covered — and not covered — under the plan. Employees should look up every service or supply that might apply to their needs. It’s important for employees to be familiar with this document so they aren’t surprised if a particular service is not covered.

The second document is called an Explanation of Benefits (EOB). After employees receive services, they should read their EOB to make sure they understand what they’re paying for. Organizations can encourage employees to call their insurance company’s customer service department with questions.

Why is checking the network so important?

Doctors and hospitals work with insurance carriers to negotiate rates, which is a big factor in how much members have to pay for care. Employees receiving services outside the network often have to pay any balance beyond what the insurance carrier pays. But by staying in network, they only pay their copay and any deductible or coinsurance that applies.

Many people don’t realize, however, that a provider’s network status can change. Health insurance members can make sure their doctor is in network by calling a customer hotline or going online and searching an easy-to-use provider directory.

What should employees know about their options for care?

First, employees need to know their options in non-emergency situations. When employees get injured or feel ill, their first instinct is often to visit the emergency room. But it’s not always the best choice. When it’s not an emergency, a visit to a primary care doctor could cost half as much as a trip to the ER — or less.

Urgent care facilities and convenience clinics are also great options for common illnesses such as a cold or flu, as well as infections, allergic reactions, minor cuts, burns and sprained muscles. Employees can get prescriptions filled and vaccinations.

Another important consideration is when employees need to get a blood test or have other lab work done. In many cases, they will automatically go to the lab that’s inside the hospital or affiliated with their doctor’s office. But there are options. Independent labs, for example, can often provide the same tests and the same level of service at a lower cost. Your insurance carrier should have tools that can help employees find other options that may be better for them and help them save money.

How can you effectively present benefits to your employees?

Communicating benefits clearly to employees is crucial in their understanding of health coverage. Benefit presentations are one of the best ways to educate employees.

To maximize interest, organizations need to make their presentations interactive and use visuals. Be open to any questions and present information in short segments to avoid confusion. After the presentation, refresh the topic by regularly emailing your employees with benefit reminders and updates.

The key is to give employees the resources they need — how to reach their insurance carrier, useful websites and where to look for their certificate of coverage or EOB.

Be open to communication and always encourage employees to ask questions.

Insights Health Care is brought to you by Medical Mutual

How to satisfy ACA guidelines without breaking the bank on your health plan

Certain employers don’t offer health coverage for their personnel because they can’t afford traditional employee benefits, whether it’s self-funded or fully insured.

At the same time, under the Affordable Care Act (ACA), many of those same employees work on average more than 30 hours per week and are considered full-time employees that companies need to offer benefits to — or face the employer mandate penalties.

In order to help fill this gap, third-party administrators (TPAs) and stop-loss carriers rolled out minimum essential coverage (MEC) and minimum value plans (MVP), says Abbe Mitze, account executive II at HealthLink.

“It’s an employer solution for satisfying the guidelines for not having the fines or excise tax imposed, a $2,000 or $3,000 penalty,” Mitze says.

Smart Business spoke with Mitze about MEC and MVP plans and the solutions they provide.

What exactly are MEC and MVP plans?

MEC only includes preventive care and wellness benefits. Applicable large employers can offer self-funded, low-cost MEC plans in order to avoid the $2,000 penalty. This penalty requires these large employers to provide group health insurance to ‘enough’ — a certain percentage of the total — of its full-time employees and dependents.

MVPs refer to the need to have a comprehensive health insurance plan with at least 60 percent actuarial value. In other words, the plan needs to pay at least 60 percent of the costs of claims submitted. These plans help employers avoid the $3,000 penalty for each employee who buys insurance through the government exchange.

Which companies would be a good fit for these types of plans?

Typical clients that would be in the market for this would be restaurants, hair salons, nursing homes, large car dealerships, etc. Basically, organizations that have low-paid employees who are borderline full time/part time could benefit.

For example, a company that rents out security officers to different organizations might have previously had a health plan carve-out that covered managers only and not their other 1,200 employees, who are now considered full time under the ACA. If they can’t afford a traditional employee benefit plan or to pay the penalties and fines, a MEC or MVP would be a good option.

Have MEC and MVPs been around long? What has been their history?

These plans were first rolled out in 2013. Most of them didn’t include hospital coverage because it wasn’t listed as an essential covered item.

However, last November, the government said that these plans needed to provide essential hospitalization coverage, but didn’t define what this actually looks like.

The TPAs and stop-loss carriers added hospitalization coverage — which isn’t as comprehensive as the traditional coverage in other health plans — and put these solutions back on the market.

This is important timing because the number of organizations that will be subject to the employer mandate, and more importantly the penalties and fines, is increasing in 2016.

If employers want to explore the possibility of getting MEC and MVPs, what else do they need to know?

You want to have a reputable broker that can educate you because it’s a new frontier. The plan requirements have already changed once, so you need someone who can stay on top of this, in case the government makes additional changes.

In addition, it’s important to make sure you’re looking for a standard plan, where all components of the benefit design fit into the actuarial calculator. MEC and MVPs come as both standard and nonstandard plans, but a certifiable standard plan is one that will hold up against the IRS and its fines.

Again, that’s why it’s important to consult with experts who can help you navigate through new territory.

Insights Health Care is brought to you by HealthLink

How to weigh the pros and cons of self-funded vs. fully insured health plans

For companies that must deal with how best to handle health insurance costs, there’s a decision that needs to be made fairly early in the process. Should a company choose to be fully insured, or should it opt to be self-insured?

“Choosing the right kind of health plan is an important part of the success and growth of a company,” says John Mills, senior director of consumer products at UPMC Health Plan. “There are a lot of misconceptions about which plans are right for which kinds of companies and you have to look at all the evidence before you decide.”

Smart Business spoke with Mills about the advantages and disadvantages of self-funded and fully funded plans for companies large and small.

What is the difference between self-funding and fully insured?

The traditional definition of self-funding is when a company pays for its own medical claims directly, usually while a third-party administrator (TPA) processes claims, issues ID cards and performs the function of a health plan.

In contrast, when a company chooses to be fully insured — the more common option for smaller businesses — the company pays a set premium price to the carrier that is fixed for the year and is based on the number of employees enrolled each month. The insurance company assumes the financial and legal risk of loss if claims exceed projections.

Can small companies afford to be self-funded?

Companies with fewer than 250 employees are often afraid that they will be exposed to too much risk with a self-funded plan.

However, smaller companies can still afford to be self-funded because they can purchase stop-loss insurance, which limits the amount of claims expenses an employer would be liable for, per covered employee, per year. This protects a company against some sort of catastrophic event involving one or more employees. Stop-loss insurance reimburses an employer’s health plan for claims above a pre-set limit.

What are the advantages of self-funding?

The most obvious advantage is paying for actual claims incurred by your employees. This means there is no chance of being ‘penalized’ if your employees in a given year use fewer medical services than had been anticipated. Any positive results that come from a company instituting wellness programs and smoking cessation campaigns can have a direct result on the bottom line.

Also, a company can easily obtain a company-specific claims report that can reveal, for instance, what percentage of claims are out-of-network, and how much is being spent on emergency room visits. This kind of information can provide direction when it comes to customizing benefit changes.

What are the advantages of fully funded plans?

Cost certainty is a major one. You know at the beginning of the year what will be your health care costs and they remain in place until a new deal is struck. Also, the health insurer assumes all of the risk and the company is spared any exposure.

What are some disadvantages to self-funding?

Self-funded plans that greatly exceed anticipated costs can create problems. Although stop-loss coverage can protect an employer from paying excessive claims in a given year, after a major incident, the cost of the stop-loss coverage the company purchases is likely to rise. It may also be more difficult to get lower rates from other stop-loss providers.

Moreover, higher-than-expected claims in self-funded plans can make it more difficult to return to a fully funded plan later. And, any organization that chooses to run a self-funded plan internally, rather than use a TPA, can run up higher-than-expected administrative costs.

Self-funding is not a quick fix and savings are not always guaranteed or immediate. In order to make a good decision, you need to study past coverage utilization, cash flow and the health status of the employees being covered.

Insights Health Care is brought to you by UPMC Health Plan

How to empower employees to manage their health care spending

With the move toward consumer-driven health care, organizations are seeing their employees become more aware of the cost of medical care. While the approach has proven effective in reducing spending for some, others are still leery of changing their benefit structure.

“Normally, people will pay a set amount in annual premiums,” says Veronica Hawkins, Medical Mutual vice president of Government Accounts. “But when your employees spend more on premiums each year than they do on medical care, consumer-driven health care may be something to consider.”

Smart Business spoke with Hawkins about what defines consumer-driven health care, how the options generally work and under what circumstances it might be right for your organization.

What is consumer-driven health care?

It refers to health plans that give employees greater control over their health care spending and helps them be better consumers.

Typically, consumer-driven health care involves a combination of a tax-free savings account, such as a health savings account (HSA) or a health reimbursement arrangement (HRA), and a high-deductible health plan. Flexible spending accounts (FSAs) are another option, which employees can use along with an HSA or HRA as an added benefit.

The high-deductible plan covers some costs upfront. Employees pay for other medical expenses using money that’s been set aside before taxes. This encourages them to manage and keep track of their own health care — and take responsibility for how those dollars are spent.

How does an HSA generally work?

With a compatible high-deductible health plan, eligible employees can open and start funding an HSA. These accounts are usually funded through payroll deductions and employees and employers can both contribute. With an HSA, there are no taxes on deposits or interest, or on withdrawals employees make for approved medical expenses.

Employees just have to make sure they use the money in their account to pay their portion of the costs. Any remaining balance at the end of the year rolls over automatically, with no penalty.

How does an HRA work?

An HRA is a tax-free arrangement that is owned and funded by the employer. HRAs are classified as ‘notional’ accounts, meaning the organization only contributes money to the account when they receive claims for approved medical expenses. The most popular HRAs are the ones that fund a portion of an employee’s deductible, but employers also have a say on which medical expenses they will reimburse.

Generally speaking, any money that’s left at the end of the benefit year won’t roll over to be used in later years.

What about FSAs?

There are several different types of FSAs. There is a health FSA, limited-purpose FSA that is usually for dental or vision care, one for dependent care expenses, one for adoption assistance, and one for parking and transit expenses. Similar to HSAs, employees fund FSAs through pre-tax payroll deductions.

While any money left in the account at the end of the year is forfeited, organizations have the option to offer a grace period of 2½ months or let employees carry over up to $500 into the following year.

What else should organizations know?

There are a lot of variables involved in consumer-driven health care, but it all boils down to empowering employees. When employees understand the cost of an office visit, a lab test or a monthly prescription, they are able to become better consumers of health care and are more likely to engage in healthy behaviors.

But just like any change in your organization, education is critical. Because once employees are responsible for funding their own health care, they need to feel confident that they can pay for what they need.

Insights Health Care is brought to you by Medical Mutual

How to educate your employees about their cholesterol levels

While most employers would certainly consider the safety of their employees a priority, it may not occur to as many of them to be concerned about their employees’ cholesterol level.

But, if you take an objective look at what kinds of problems high cholesterol can create for employees — and, by extension, for employers — it makes a lot of sense.

“Lowering the cholesterol of employees should be a priority for employers,” says Debi Vieceli, RN, a Cardiac Care manager for UPMC Health Plan. “Informing employees about the dangers of high cholesterol and what they can do to manage cholesterol levels is something all employers need to consider.”

Smart Business spoke with Vieceli about cholesterol and what employers can do to educate their employees about how to lower it.

Why should employers be concerned about employees’ cholesterol?

According to the Centers for Disease Control, 71 million Americans have high LDL, or ‘bad’, cholesterol and roughly one-third of those get treatment for it.

The diseases that are connected with high cholesterol tend to be more serious, even potentially fatal. High cholesterol levels can lead to heart disease, heart attack and stroke. In fact, the higher the blood cholesterol level, the greater the risk for heart disease and heart attack.

Education about the danger of high cholesterol is important because there are no outward, obvious symptoms.

Moreover, if you have high cholesterol, there are things you can do to change that. Because high cholesterol affects everyone — old, young and in-between, women and men — it is likely a part of every company’s workforce.

What are some approaches an employer can take to help lower the cholesterol of employees?

One approach many employers use is creating fun events that place emphasis on healthy lifestyle choices. A company ‘weight race,’ for instance, is a popular option because it enables employees to set reasonable weight-loss goals. So, too, is a fitness challenge that encourages employees to exercise by participating in sports leagues.

Companies also can encourage physical activity by offering to pay for gym memberships for employees.

Because eating an unhealthy diet is a contributor to high cholesterol, employers can encourage healthier eating through the choices that are provided in workplace cafeterias and vending machines. At catered meetings, the food offerings should include healthy choices.

When you increase your employees’ opportunities to eat healthier, you increase the likelihood that they will.

Can an employer encourage healthy behavior?

Workplace policies have been shown to be able to promote a culture of good health. One important policy that is sometimes overlooked is offering a health benefits plan that allows employees to have regular visits with their physicians.

The sedentary lifestyle connected with the modern workplace also contributes to the development of serious health issues. That’s why creating an exercise area for employees can be a positive, if this is a possibility.

How else can employers take steps to address their employees’ cholesterol issues?

Periodic blood cholesterol screening and health risk assessment programs at the worksite are two ways to identify employees with high cholesterol and help them begin to control it.

One-on-one coaching and lifestyle coaching can also be effective ways to follow up with employees identified as having high cholesterol.

In addition, informational brochures, letters and newsletters can supplement the lifestyle coaching.

Insights Health Care is brought to you by UPMC Health Plan

How to increase participation in health screenings, encourage preventive visits

Today, more organizations are adopting the motto “prevention is better than a cure” when it comes to the health of their employees. Unhealthy lifestyle choices are linked to the majority of employer health care costs and, according to studies, often have a dramatic impact on productivity.

“At most organizations, employees understand the benefits of preventive care and want to know their risk factors,” says Amber Hulme, Medical Mutual Vice President, Central and Southern Ohio. “But they also might need a push, which is why it’s still a challenge to get employees engaged.”

Smart Business spoke with Hulme about the importance of preventive care and health screenings, why employees may be reluctant to participate and what organizations can do to incentivize employees to focus more on prevention.

Why is preventive care important?

By promoting preventive care, organizations are making sure their employees have a baseline for their health. This will help them be more aware of potential problems, get diagnosed earlier and avoid more serious health conditions.

When employees are aware of what’s going on with their body and can stay healthy, they are able to come to work more often and be more productive.

How can health screenings help?

Health screenings measure key physical characteristics, such as height and weight, body mass index, blood pressure, blood cholesterol and blood sugar. Over the past several years, organizations have started introducing workplace health screenings as a way to evaluate the overall health of their employees and identify the biggest risk factors.

They also give organizations the information they need to work with their health insurance carrier to better address the specific needs.

Health screenings, however, are definitely not a replacement for regular medical examinations or wellness visits with a health care provider. They are also not intended as a way to diagnose disease.

Why are employees sometimes reluctant to participate?

There are many reasons. But one of the most common is a fear of exposing personal health information and not understanding how it will be used. Employees also may believe the information will be used against them later, and they might be subject to consequences, penalties or discrimination.

In addition, employees could just be more comfortable going to their own doctor. In those cases, organizations can choose to incentivize annual physicals wherever the employee wants to go. That way, the employee sees their doctor and gets the same tests, but their employer doesn’t see the results and the organization still has proof that it happened.

What types of incentives do organizations use?

It depends on the organization. Today, the majority of employers in the U.S. offer employees some sort of wellness incentive. Monetary incentives have become the most common.

Under health care reform, organizations can offer incentives worth up to 30 percent of the total annual cost of individual coverage. That could mean contributing to a health savings account, discounting premiums or waiving their cost-sharing responsibility, which refers to their deductibles, copays and coinsurance.

Paid time off is another popular incentive, particularly in the public sector.

What else is important to know?

Education and effective communication is the key to help employees get past any concerns they may have, especially if those concerns involve their personal health information.

It’s also important to create a culture of health, regardless of whether you offer an incentive or how much it is.

When employees feel like they are in it together, they share their experiences, like losing weight or getting an early diagnosis that might save their life. Those kinds of personal messages, from people they know, can be powerful motivators.

When employees start encouraging each other to be healthier, that becomes an incentive in itself.

Insights Health Care is brought to you by Medical Mutual

How using a three-tier network strategy can contain health care costs

Traditionally, health insurance employee benefits have two tiers — in-network and out-of-network. But in self-funded solutions, in particular, you may have the ability to set up a three-tier benefit design.

This network strategy can help you contain cost by incentivizing and channeling your employees to lower cost facilities and doctors, says Abbe Mitze, account executive II at HealthLink.

“By influencing your employees’ behavior in a non-disruptive way, you’re using the carrot approach versus some type of punitive measure,” Mitze says. “And I’ve seen an example where a 30 percent shift occurred while employees were seeking care when this type of arrangement was introduced to them over the course of a year.”

Smart Business spoke with Mitze about setting up a three-tier benefit design.

Why is it so important to try to contain health care costs?

Health care premiums continue to increase for the 55 percent of firms that offer health benefits to at least some of their employees. The annual survey of employers by the Kaiser Family Foundation found that annual premiums for employer-sponsored family health coverage reached $16,834 in 2014, which is up 3 percent from the year prior. Of that amount, workers paid $4,823 on average toward that cost.

If employers want to continue to offer health plans — which can be used as a recruiting tool — they must find ways to better manage their costs.

How does a three-tier benefit design work?

A three-tier option introduces in a third tier of benefits that is based upon the cost of care with the facility or provider. A facility and provider is placed into tier I if it is a lower cost option, tier II if it costs a little bit more and then tier III is out-of-network.

Then you take the benefit design and pair that with the cost. The richest benefit option — where the employee is going to pay the least out of their pocket — is applied to tier I.

If you want to introduce this type of design typically you’re coming from a two-tier benefit network design, so tier I becomes a better benefit than employees currently have today. Tier II is the current in-network benefit level, and tier III remains out-of-network.

People can be attached to their doctors, so that’s why you let them keep their current benefit. Employees still have a choice and have access to the full network, but you reward them for going to the most cost effective providers.

In what situations does this kind of benefit design work best?

A three-tier design is important in a self-funded solution because the dollars that are being paid out for claims are the employer’s dollars. Your third-party administrator or carrier needs to be able to administer a three-tier benefit design, and not all claims payment systems can accommodate that.

This also works better in an area where you have at least two hospitals and multiple health care providers. If you live a rural town with only one hospital, there won’t be as much engagement because people don’t have as many choices.

What best practices would you recommend health plan sponsors follow when implementing a three-tier benefit design?

Quality and cost are not correlated in the health care industry, and your employees need to be educated about that. Overall, you want to be very clear in the employee communication and education. It’s all about the education of who falls into what tier, and making sure employees are aware of that.

You can even add an online tool, like a treatment cost calculator, so they can make a more educated decision. The tier is calculating some of the cost for them already, but the right technology can further enhance their selection.

In 2014, 19 percent of employers offering health benefit had tiered networks in their largest health plan, according to Kaiser’s survey. Tiered networks continue to be a compelling tool to channel your employees’ choices, which you should take time to research and consider implementing.

Insights Health Care is brought to you by HealthLink.

How to utilize captive self-funded arrangements to reduce risk

The worlds of health insurance and financial wealth investment are merging together with captive self-funded arrangements.

These captives also are giving small and midsize employers a way to operate a self-funded group health plan for less risk.

Traditionally, midsized firms, those with 100 to 1,000 lives, have been reluctant to self-fund. While 93 percent of firms with 5,000 or more employees have self-funded health care, only 58 percent of midsize firms chose this option, according to a 2010 report by the Kaiser Family Foundation.

“These arrangements have been around for a while, but they are gaining more ground as small groups look for ways to self-fund with reduced risk,” says Abbe Mitze, account executive II at HealthLink.

Smart Business spoke with Mitze about the benefits of captive self-funded arrangements.

What are captive self-funded arrangements?

They pull together a group of employers — who are either close to each other regionally or have some common thread of industry such as farm implement stores — and put them in the same pool when they buy their stop-loss insurance.

Stop loss insurance is what protects the employer’s plan assets once the claims reach a certain predetermined amount. These policies protect you against an unexpectedly large claims when you self-fund your health insurance.

Each group stop-loss captive has its own unique structure, but they all entail the employers buying individual stop loss policies. The critical mass and structure of these programs provide economies of scale for each employer by providing greater purchasing power.

Due to the risk sharing opportunity that the captive provides, it is also a more efficient model from an insurance purchasing standpoint

By spreading the risk across many companies, employers can find a piece of mind that is priceless. They don’t have to be as concerned about large swings in cost, which is one of the biggest deterrents to smaller group self-funding.

In addition, the captive or insurance broker who manages the captive will take some of those stop-loss premiums and invest them.

If the investment does well, the employer groups in the captive would receive a dividend. You could use that dividend to reinvest in wellness or other health measures that would benefit your self-funded solution.

How does the captive group typically find each other, in order to come together?

The insurance or captives broker would get a concept pulled together, secure the vendor they want to use or who they want to manage the captive, and then go out and find the collective group of employers. They are the ones who explain the concept and what all is involved.

Doesn’t an association or trust plan do the same thing?

It’s very similar. An association or trust comes together to leverage their volume to have more purchasing power in the market. And the same is true for a captive, but then there is this financial component of an additional reward based upon the investments that are made.

What else do employers need to know?

You still manage your health benefits and plan independently, just as you do today as a standalone employer group. The only thing it affects is your stop-loss.

There’s not a lot of administration on the part of the employer group, but you do need to make a small initial investment that provides the starter capital for the wealth management piece. It’s typically a percent of the stop-loss premium.

Who would be a good candidate for a self-funded captive arrangement?

The employer group would need to have a tolerance for self-funding, and also have the capital necessary to make that minimal investment upfront.

Insights Health Care is brought to you by HealthLink