How healthy eating can increase employee productivity

In any business, the productivity of employees is critical to its success.

That’s why many organizations look for ways to keep their employees working at maximum efficiency. From the work environment to managerial support to quality work/life balance, many dynamics contribute — and workplace nutrition is another important factor.

“Many workplace wellness programs focus on fitness and health screenings,” says Veronica Hawkins, Medical Mutual vice president of Statewide Accounts. “Encouraging employees to eat healthy should also play a key role.”

Smart Business spoke with Hawkins about why organizations should promote healthy eating and how they can do it effectively.

How does diet correlate with productivity?

Plenty of studies link good nutrition with better overall health. It makes sense. People who eat well often feel better and have more energy.

Employees who try to follow guidelines of good nutrition also reduce their risk of obesity, heart disease, stroke, diabetes and some types of cancer.

Are there simple things leaders can do to promote healthy eating?

Leaders can set a positive example. If employees see their managers drinking water throughout the day and making good decisions about foods they eat, employees may be more apt to follow suit.

Another way is to implement an awareness campaign that encourages healthy lifestyle choices and includes tips on how to do so. This can include bulletin boards, posters or emails that focus on the benefits of nutrition, offer meal strategies and promote local farmers’ markets or restaurants with healthy menus.

Hosting healthy department potluck lunches also can get employees engaged as they try new foods and share recipes.

These are good ways to start making nutrition part of the workplace culture.

How can organizations create a culture of nutrition?

Any food ordered for meetings should include fruits, salads and other low fat items instead of donuts and pizza. Most organizations provide refrigerators and microwaves, but toasters and blenders can make it even easier for employees to bring food from home that can be prepared.

If your organization has a cafeteria and/or vending machines, make sure plenty of nutritious options are available.

At Medical Mutual, we often work with employer groups to design and implement nutrition programs that focus on healthy eating. This can also include online virtual coaching or a personal health coach through a lifestyle-coaching program.

Offering nutrition classes is another cost-effective way to reach a large number of employees and address multiple topics. These could be one-hour ‘lunch and learns’ that address specific issues, like understanding food label information, or longer seminars that delve into a variety of subjects, like stress, weight loss, etc.

Classes are a good way to bring employees together and help them support each other in making healthier choices.

Are there other resources available for organizations to use?

The Centers for Disease Control and Prevention’s website offers a plethora of nutrition information. There are multiple links to fact sheets, an interactive website about improving fruit and vegetable consumption, downloadable brochures, and links to additional useful sites such as the U.S. Department of Agriculture. These can all be made available to employees.

If your organization makes healthy eating part of the workplace culture, it can go a long way toward keeping employees happy, healthy and productive.

Insights Health Care is brought to you by Medical Mutual

Decrease workplace stress with a more relaxing, healthier environment

Stress is a critical health issue most employees face at work. It has been called the “health epidemic of the 21st century” by the World Health Organization.

According to the American Institute of Stress, it costs American businesses up to $300 billion a year.

“Stress in the workplace has become a significant issue for many businesses,” says Amber Hulme, Medical Mutual regional vice president for Central Ohio. “Beyond the health care costs involved, employers see a loss of productivity, absenteeism, turnover and disengagement. That’s why it’s important to educate employees about how to manage their stress.”

Smart Business spoke with Hulme about how a stressed workforce can affect your bottom line and what organizations can do to help employees reduce, or at least manage, their stress to make themselves healthier, happier and more productive at work.

Why is stress such a problem in the workplace?

Clinical research suggests that stress is an underlying factor in at least 70 percent of all visits to family doctors, and 30 percent of employer disability claims are behavioral in nature.

Most employers advocate a healthy work/life balance, but in today’s work culture it can be challenging to really put the philosophy into practice. If it’s a priority for supervisors and upper management, however, it can really make a difference.

What activities have been shown to help?

For most people, stress management starts with a healthy lifestyle. Exercise, in particular, can be very effective when it comes to reducing stress levels at work. Employee wellness activities, such as paying for a portion of employees’ gym memberships or running group-wide healthy eating challenges, are good ways to help employees unwind and feel better.

Programs don’t need to be overly complicated or regimented. The process can be as simple as organizing a regular walking group or exercise program. Then it can grow from there.

Medical Mutual, for example, will help organizations develop and implement stress reduction programs that offer employees access to personal health coaches and online options for virtual coaching.

How important is flexibility?

When possible, enabling employees to work remotely or have a flexible schedule has proven to be good for morale. This sort of approach demonstrates trust and allows employees to manage their own time.

It also helps to remove extra stressors that working parents, for example, might face — worrying about child care, sick days or doctor’s appointments.

Of course, it’s important to set clear parameters for employees and make sure they understand exactly what is permitted. It can be challenging for some organizations, but it can have a very positive effect.

What about environmental factors?

That can make a big difference, too. For many employees, their surroundings can have a significant effect on their productivity and overall job satisfaction — both of which factor into stress levels.

Organizations might consider brightening the color scheme, adding a few plants or hanging some artwork. It’s also sometimes helpful to have a space where employees can get away for a few minutes. When employees have the ability to break away, even for a short time, it can help boost their productivity for the rest of the workday.

What else should employers know?

Communication is critical. Managers should be encouraged to be as open and transparent with their employees as possible. When you keep employees informed, it can dramatically decrease their levels of stress and anxiety.

In addition to relieving stress caused by the unknown, having an open dialogue makes employees more likely to share their own concerns, ideas and thoughts. And that will often create a healthier — and less stressed — culture throughout the organization.

Insights Health Care is brought to you by Medical Mutual

How to help your employees better manage their care and costs

As the cost of health care continues to rise, studies have shown that almost half of those costs are unnecessary or avoidable. To reduce those expenses, many organizations want to help their employees make better health care choices on their own.

“When employees understand their health insurance, they can make good decisions that benefit themselves and their employer,” says Veronica Hawkins, Medical Mutual vice president of Statewide Accounts. “That’s why it’s important for organizations to make sure their employees have all the information they need.”

Smart Business spoke with Hawkins about what organizations can do to help their employees take a more active role in their health care decisions.

What resources are most important to help employees understand what’s covered?

Probably the most important resource is their benefits book or certificate of coverage. This is the document that explains what services are covered — and not covered — under the plan. Organizations should make sure their employees receive a copy, or have access to it online. This can help them understand the terms of their plan so there are no surprises when they need a service or supply.

How much does the network of providers factor into costs?

It can be significant. The doctors and hospitals employees choose to utilize factors into how much they pay for services. By choosing doctors and facilities in the insurance carrier’s network, employees may only have to pay their copay and any deductible or coinsurance that applies. Employees receiving services outside the network often have to pay any balance beyond what the insurance carrier has agreed to pay.

Before choosing a doctor for any type of treatment, or a facility for any test or procedure, it’s important to check the network. Even if a doctor or facility was listed in the network previously, that status can change. Employees should make sure their doctor is in network by calling their carrier’s customer hotline or going online and searching the provider directory.

What are some other easy ways to save money?

Many people aren’t aware that doctors and health care facilities charge different amounts for the same services. Often, patients can be charged more for seeing a doctor at a facility he or she doesn’t own, like a hospital-owned clinic. It may cost less to see that same doctor and have the same treatment at a different facility. This can also apply to lab costs, as price differences can be significant. To maximize benefits and minimize out-of-pocket costs, it’s important to shop around within the plan’s network.

Some insurance carriers offer online tools for comparing costs. Price estimates are often available for everything from office visits to X-rays to surgical procedures, and may factor in facility fees and other associated costs. These estimates should be pretty close to what the member will have to pay.

What is the best way to keep employees informed?

Good communication is critical. Organizations can partner with their insurance carriers to create a customized approach for building awareness of all these tools. This could include interactive presentations that use visuals and easy-to-understand language. Short segments with a question and answer period may be a good option to help avoid confusion. After any presentations, refresh the topic by emailing employees with benefit reminders and updates.

The key is to give employees the resources they need. They should know how to reach their insurance carrier, where to look for in-network providers and how to use their benefits book and explanation of benefits.

Insights Health Care is brought to you by Medical Mutual

How to complete your employee health coverage forms for the IRS

Last year, many organizations had to figure out the new rules for submitting information about their employee health coverage to the IRS. It’s that time of year again, and while the overall process is very similar some aspects have been adjusted since last year.

“Just like last year, different employers will have different requirements they have to meet,” says Amber Hulme, Medical Mutual regional vice president for Central Ohio. “To avoid fines for the business, or even tax penalties for employees, employers need to know which requirements apply to them this time around.”

Smart Business spoke with Hulme about what employers should do to understand the annual IRS reporting requirements and what they can expect for 2017.

What is the purpose of this reporting?

The reporting really consists of two parts. One helps the IRS prove that everyone in the U.S. has health insurance — or that they qualify for an exemption. The other is intended to make sure certain employers can offer ‘minimum essential coverage’ for their employees. To do all of that, the IRS needs to collect the appropriate information.

How do employers know which requirements apply to them?

First, look at funding type. If you’re fully insured, your insurance company will handle 6055 reporting for you.
Then look at how many full-time employees you have (including equivalents). That’s your ‘FTEs.’ If that number is 50 or more, you will need to report for 6056.

Self-funded employers usually have more work to do. They have to report for 6055, which includes collecting any missing Social Security numbers from employees and dependents. And they also have to report for 6056 if they have 50 or more FTEs.

How do insurance carriers handle 6055 reporting?

Insurance carriers are required by law to send 1095-B forms to all fully insured members. Those forms serve as their proof of coverage for the previous tax year. Then, if any of those members don’t have Social Security numbers on file for either themselves or a dependent, carriers are also required by law to contact members directly to collect that information. So employees might get requests to supply that type of information.

Has the process changed at all since last year?

The overall process is essentially the same, but the IRS has revised instructions on its website, IRS.gov. This year the deadline extensions are going to be different than they were in 2015. Generally speaking, any forms for employees need to be delivered to them by March 2, while forms submitted to the IRS are due by Feb. 28 if they are filed by mail, and March 31 if they are filed electronically.

Are the penalties the same for not complying?

Employers are subject to fines of $260 per instance, which is up slightly from last year. It’s also a flat rate now — instead of a range based on the intent behind a mistake or omission.

And like last year, employees could see money come out of their next tax return if the IRS doesn’t have all the Social Security numbers it needs from them. So even if your organization isn’t required to file, it’s smart to help your insurance carrier collect what it needs.

Any other reminders as organizations prepare?

Just make sure you know which forms you have to submit and what information is required. If anything is missing, it’s better to know sooner than later. And, as with any forms submitted to the IRS, it’s always a good idea to consult with a tax adviser or legal counsel.
In addition, keep in mind that these requirements are tied to a provision of the Affordable Care Act (ACA). So any changes to the ACA under the Trump Administration could affect what organizations will have to do.

Insights Health Care is brought to you by Medical Mutual

How organizations can benefit from healthier employees

The overall success of your organization depends on the people you employ. Without them performing their jobs at a high level each day, productivity — and your bottom line — would most certainly suffer. That’s why it’s so important to keep your employees happy and healthy. A workplace wellness program is an excellent way to help accomplish both of those goals.

“A wellness program can be an effective way to engage employees and promote healthier lifestyles,” says Veronica Hawkins, Medical Mutual vice president of Statewide Accounts. “Plus, it can be tailored to incorporate an array of health-related activities based on an organization’s needs and budget.”

Smart Business spoke with Hawkins about workplace wellness programs and the many benefits organizations can enjoy if they choose to make the investment.

What do workplace wellness programs involve?

Programs can vary in size and scale and offer things like health education, disease management programs, health screenings, fitness classes, fitness center memberships and more.

Offering a health assessment is a good place to start. A health assessment is a survey that asks questions about employees’ health and fitness. Questions about smoking, frequency of doctor’s appointments, exercise habits and health conditions can give your organization an idea of what to include in your program. For example, if there is a high percentage of diabetes among your employees, you may want to offer a diabetes management program.

Additionally, a health assessment can provide you with some insight into what your employees would like in a program. There may be a high interest in fitness classes or fitness center memberships. Or employees might like the convenience of on-site health screenings.

Your organization can also offer incentives to increase participation. By setting goals for your employees and offering rewards for achievement, you can get employees engaged and excited about being involved and getting healthier.

Can these programs help lower health care costs?

Studies show a significant percentage of health care costs could be linked to employees’ poor lifestyle choices. Tobacco use, unhealthy diets and a lack of exercise can increase the risk of chronic disease and lead to a variety of costly health problems. Organizations that invest in a wellness program could see a reduction in medical claims, disability costs, workers’ compensation claims and absenteeism due to illness.

Helping employees learn about their health can help them and your organization save money. The more they understand their risk factors, the more likely they may be to make positive changes to help improve their overall health.

How do employees benefit?

Recruiting and retaining talented people isn’t easy. Many organizations are now looking for unique perks to set them apart from the competition. A wellness program is one way to demonstrate a real commitment to the health and well being of employees. That can result in increased job satisfaction among staff members and stronger retention rates.

A wellness program can also help build camaraderie among co-workers. Employees can participate in a variety of non-work-related activities or simply go to the gym together. Competition and encouragement can go a long way toward helping people change their lifestyles and make better decisions.

What’s the bottom line?

More and more organizations are becoming believers of wellness because they see a difference.

Wellness programs can help employees feel better. When they feel better, it helps improves their morale, their mental outlook and their productivity. It also helps them live healthier lives, which in turn reduces absenteeism and medical claims.

Sure, there is a cost involved in setting up a wellness program, but it’s really an investment in your employees and in the future of your organization.

Insights Health Care is brought to you by Medical Mutual

How stop-loss insurance can reduce the risk involved in self-funding

As more businesses look at self-funding as a way to control their health care costs, it’s not uncommon for stop-loss insurance to be part of the discussion. In fact, according to a recent study from QBE Solutions, 60 percent of self-funded employers now have stop-loss insurance.

While some businesses choose to forgo stop-loss to avoid the extra monthly premium costs that come with it, many others have determined it’s a necessary measure to protect their business from unexpectedly high claims.

“Organizations assume more risk when they self-fund, but most want safeguards in place to protect their business,” says Amber Hulme, Medical Mutual regional vice president for Central Ohio. “While insurance carriers have set products to offer, there is also typically a fair amount of customization involved in terms of the contract. It’s important to get all the pieces right.”

Smart Business spoke with Hulme about how stop-loss insurance works, why it could be a valuable tool for organizations that fund their own health benefits and what types of contract decisions could make a big difference in the long term.

What is stop-loss insurance?

Stop-loss insurance limits risk for a self-funded employer when one employee has a catastrophic claim, as well as when claims for the entire organization are higher than a set amount. It insures the employer, not employees or other health plan participants.

Stop loss policies are initially written as indemnity policies. In others words, the employer pays the claim and the carrier then reimburses them.

How does it work?

Well, there are two types of stop-loss insurance — specific and aggregate. Specific stop-loss limits the amount an organization would have to pay for an individual claim from a specific employee. Usually an organization pays a monthly premium based on how many covered employees it has.

Aggregate stop-loss limits the total amount the organization will have to pay in claims, for all of its employees for the full length of the contract.

Most choose to have both types of stop-loss insurance to cover both scenarios.

Why is stop-loss getting more attention lately?

One reason is because self-funding is getting more attention, especially for small businesses that have 50 or fewer employees. In 2018, those businesses may lose the transitional or ‘grandmothered’ status that has kept them exempt from many aspects of the Affordable Care Act.

Stop-loss insurance is one of the most crucial elements of a self-funded health plan, because it’s the best way to help the plan limit its risk. So, as more organizations take on the financial risk of self-funding their employees’ health care coverage, stop-loss will continue to be a critical component.

What factors should organizations consider?

There are several contract provisions that organizations need to understand and take into account.

One of the most important aspects involves a practice called lasering. When insurance companies give a quote or a rate renewal, they might place a higher deductible on certain individuals or even exclude them from coverage. That’s called lasering. Organizations need to understand their insurer’s policies on lasering, and how it might affect their coverage when it’s time to renew their contract.

Is there anything else to consider?

One of the biggest factors in stop-loss, and self-funding as a whole, is to know your population. Most insurance companies need to know about any employees with a history of high claims or any known health risks before they will even give a quote. It’s a good idea for organizations to be prepared with that information ahead of time.

There are various types of stop-loss coverage available, so start by talking to your insurance carrier or other stop-loss carriers to find out which options make the most sense.

Insights Health Care is brought to you by Medical Mutual

How organizations can become better prepared for open enrollment

Fall is upon us and we’re getting closer to the end of 2016. That usually means it’s time for health insurance open enrollment for the coming year. This can be a confusing and stressful time for many employees. Is there anything organizations can do to make the process go more smoothly?

“Research shows that employees are not as well-informed about their benefits as human resources (HR) professionals might think,” says Veronica Hawkins, Medical Mutual vice president of Statewide Accounts. “There are a variety of ways organizations can communicate better and make the rollout of health care plans easier.”

Smart Business spoke with Hawkins about the ways organizations can help their employees understand the process, while also helping them become better health care consumers.

Why is open enrollment so confusing for employees?

Most employees don’t consider themselves to be very knowledgeable about health insurance. They’re also unsure about when they can make changes to their plans. Less than half know they can change their benefits because of qualifying life events, like marriage, divorce or the birth of a child.

This shows that employers can do a better job of informing employees of their options.

What should organizations ask of their carrier?

After an organization has made the decision about which health insurance plan to purchase for employees, it can be difficult to make sure employees understand what’s available to them. Employees often have a lot of questions during open enrollment.

It’s the carrier’s job to provide a variety of materials and support to help these employees better understand their benefits. Some will schedule on-site meetings with employees to answer questions and review plan benefits. Organizations should definitely take advantage of these options since they can help save a lot of time and effort.

How can organizations communicate better?

Surveys show one-on-one meetings, direct mail pieces and information on the organization’s website are the top three most preferred communication methods. One-on-one meetings won’t be possible for every organization, but a more personal touch throughout the open enrollment process can reduce anxiety and lead to better understanding.

Bringing in a benefits counselor is another good option. This can be someone who works for an employer or is brought in from a broker or third-party benefits administrator, or TPA, to be a point person for all benefits questions. Having an expert available to guide employees through the open enrollment process can improve their experience.

Organizations can use their own Intranet, internal websites and HR platforms to provide employees with important information about their benefits. Some companies even handle their open enrollment online, which younger employees appreciate.

Organizations should also take advantage of any online tools offered by their carrier. These tools can help members better manage their health care, keep an eye on deductibles, find providers and more, to help control their costs.

What are some other best practices?

The open enrollment period shouldn’t be the only time during the year an organization talks about its benefits program. Employers can make an effort to keep an open dialogue and remind employees to take advantage of their benefits. This will help prepare them to select benefit options each year based on their needs and those of their families.

It’s a good idea to write about employee benefits regularly in employee newsletters or on an internal blog. These are easy ways to remind employees of the value of their benefits program.

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How organizations can spend less on high-cost specialty drugs

The cost of specialty drugs continues to rise. In fact, it almost doubled from 2003 to 2014, according to a study from UNC-Chapel Hill. While less than 2 percent of the U.S. population used these drugs in 2015, research from pharmacy benefit manager Express Scripts shows they represent 37 percent of the nation’s drug spending.

By 2018, the figure is expected to reach 50 percent.

“Specialty drugs can cost several thousands of dollars for each prescription,” says Amber Hulme, Medical Mutual vice president of the Central Region. “And every year, costs go up, more drugs are released and organizations see their drug spend increase by 20 percent or more. That’s why it’s so important for them to take steps to control their own spending.”

Smart Business spoke with Hulme about the importance of having programs in place to control spending on these expensive, specialty drugs, and what steps organizations can take that will make the biggest impact.

What are specialty drugs?

Specialty drugs are often used to treat very rare or complex conditions that usually affect a very small portion of the population. They are typically biological drugs that are infused, injected or require special handling. Some common examples are those drugs used to treat cancer, multiple sclerosis, rheumatoid arthritis and AIDS/HIV.

What’s the best way for organizations to manage specialty drug costs?

First, make sure a specialty pharmacy is handling specialty drugs for your employees. Specialty pharmacies normally have the best pricing available. A retail pharmacy dispensing a specialty medication doesn’t have enough volume; they may only have one or two patients for certain conditions. A specialty pharmacy, on the other hand, might distribute these drugs across a much larger region and serve many more patients.

So it’s important for organizations to check with their insurance carrier or pharmacy benefit manager to see what specialty pharmacies are available in the pharmacy network. They should encourage — or even require — employees to use specialty pharmacies to help employees get the best possible prices for these expensive drugs.

What services do specialty pharmacies offer?

In addition to better pricing, specialty pharmacies do in-depth patient care and training. Clinicians will often train patients, for example, on how to administer medications that require self-injections. There’s also outreach to patients to make sure they are taking their medications.

One problem with specialty drugs is adherence. When employees take their medications properly, they’re more likely to be able to come to work, and less likely to need costly emergency room trips. This can make a big difference to an organization in terms of overall medical costs.

What other cost-saving measures are there?

Many organizations implement processes called ‘prior authorization’ and ‘step therapy.’ These two programs require that patients meet the appropriate criteria for the medication and first try a proven, but more affordable, drug before a more expensive alternative will be covered.

Another measure is to limit supplies of specialty drugs to 30 days. This helps avoid unnecessary costs that occur when a patient experiences intolerable side effects after the first few doses or the drug is no longer effective. Also, organizations with high employee turnover, for example, may not want to offer a three-month supply of a drug that costs thousands of dollars.

Anything else organizations should know about specialty drugs?

One development that could change the market is the use of ‘biosimilars,’ which are essentially generic alternatives to specialty drugs. It’s the same concept as traditional generics, where other manufacturers can sell the same drug for a lower price — potentially 15 to 20 percent less than the cost of the original drug.

So far, the U.S. Food and Drug Administration has only approved two biosimilar drugs, Zarxio (a drug used in cancer treatment) and Inflectra (a drug used for inflammatory conditions), but it is expected to approve others in the relatively near future.

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The importance of cost transparency in medical care

In health care, the consumer mentality continues to grow. Over half the respondents to Deloitte’s 2015 Survey of U.S. Health Care Consumers said they go online to research information about their medical needs. At the same time, only 30 percent of consumers are comparing prices before an appointment or procedure, according to a recent survey from HealthMine.

“Consumers definitely want cost transparency in medical care, but there’s still a disconnect that keeps some people from putting it into practice,” says Veronica Hawkins, Medical Mutual vice president of Government Accounts. “While more insurance carriers have introduced cost estimating tools, employees need to understand what the tools can do and how to use them effectively.”

Smart Business spoke with Hawkins about why cost transparency is so important, how cost comparison tools generally work and how much difference a little research with the right tools can make.

Why is cost transparency important?

With many employers moving to high-deductible health plans, employees are being asked to cover more of their medical expenses. To do that, they need to be able to evaluate their options and make the most informed decisions they can.

That means knowing how much a visit or a procedure is going to cost before they go — not after they get a bill. Most people don’t understand that costs can vary widely for medical services. They are surprised to learn costs can even be different for the same procedure, performed by the same provider at different locations.

How do cost comparison tools work?

Depending on the organization’s insurance carrier and the employee’s specific health plan, each tool will probably work a little differently. Price estimates are often available for everything from office visits to X-rays and surgical procedures. The estimates may factor in facility fees, as well as associated costs like consultations, outpatient visits, medications and rehab. That means the estimates should be pretty close to what the patient will have to pay — at least when there aren’t any complications.

What are some easy ways to save?

They are many services that can include facility charges. These extra charges come into play when you see a doctor at a facility he or she doesn’t own, like a hospital-owned clinic. In many cases, patients can pay much less by seeing the same doctor, and having the same treatment, at a different facility. To reduce the cost of those visits, it’s important for employees to know if facility charges will apply, and whether they can be avoided. These tools can help with that.

Should employees be looking at lab costs, too?

They absolutely should. Many people have their lab work done at the hospital or clinic where they see their doctor. But they have a choice. If their health plan has a cost comparison tool, employees can see how much a standalone option, like an independent lab, will charge for tests they might need. Price differences can be significant.

For example, hospital-based labs sometimes charge up to 70 times more than an independent lab for a simple blood test. If a doctor has an agreement with the lab, the patient may not even have to go to a different facility. A lab technician can pick up the sample from the doctor’s office. They’ll do the test, submit the claim and share the results with the doctor.

What other information is important?

Cost is obviously important, but it’s definitely not the only factor. More people are looking through reviews and ratings to help them make informed medical decisions.

That’s why Medical Mutual’s cost comparison tool, for example, includes patient satisfaction scores and quality ratings for doctors and hospitals in its network. It also includes specific information about the doctors themselves, like how long they have been practicing, where they went to medical school and what languages they speak.

Insights Health Care is brought to you by Medical Mutual

How organizations can benefit from self-funding employee health plans

How to fund health benefits is a major decision for any organization. There are two options — get fully insured through a health insurance carrier or fund it themselves. Until recently, self-funding was only considered for large organizations due to the potential risk involved, but that’s changing.

In fact, according to Pricewaterhouse Cooper’s 2015 Health and Well-being Touchstone Survey, 66 percent of employers with 500 to 1,000 employees are now self-funding their health benefits. That’s up 7 percent from the previous year and up 11 percent compared with 2013.

“Self-funding can be a very effective way for some businesses to control the cost of health care,” says Amber Hulme, Medical Mutual vice president of Central and Southern Ohio. “But it’s definitely not for everyone. Organizations need to evaluate their options carefully to make the right decision.”

Smart Business spoke with Hulme about the basics of self-funded health plans, how organizations might benefit from the approach, and what factors need to be considered before making a switch.

Why has self-funding grown recently?

A decade ago, self-funding was primarily utilized by employers with at least 500 employees. Now, more insurance carriers, including Medical Mutual, have introduced self-funded products for organizations with as few as 50 employees.

In 2018, many small businesses are scheduled to lose the transitional or ‘grandmothered’ status that has kept them exempt from some aspects of the Affordable Care Act. In preparation, even businesses with as few as 10 employees are evaluating the benefits of self-funding.

How does it generally work?

With self-funding, organizations budget for and pay the claims for all employees covered by the plan and any covered dependents, plus administrative fees. Most employers also pay for stop-loss insurance, which limits risk when one employee has a catastrophic claim, as well as when claims for the entire organization are higher than a set amount.

It’s basically the alternative to being fully insured, where the insurance carrier charges a premium and pays the claims — thereby assuming all the risk.

What are the benefits?

Organizations usually decide to be self-funded because it lets them predict costs based on their specific claims history and make any necessary adjustments. If claims are lower than expected, they can invest that money in the business or offer incentives for employee wellness. If claims are higher, their stop-loss insurance can cover it.

There also can be tax advantages to self-funding. Under health care reform, there are certain taxes related to risk that only apply to fully insured health plans. By moving to self-funding, organizations hope to eliminate some of those taxes from their budget.

When isn’t self-funding a good option?

Self-funding introduces more risk, so it’s usually geared toward organizations with more predictable claims. That’s why organizations need to be familiar with their claims history and understand the overall health of their employees when they are making this decision. If the population is relatively unhealthy, for example, self-funding might be a challenge.

Another important factor to think about is their financial flexibility. Some organizations simply don’t have the cash flow available to cover unexpected claims if they come up. Others may need to know their costs ahead of time, and prefer the predictability of being fully insured.

What other factors should be considered?

Self-funding isn’t a short-term solution. It requires a full commitment and a long-term strategy. To actually control costs through self-funding, organizations need to manage their claims effectively. That means committing to keeping their employees healthy through wellness and disease management programs, as well as negotiating with health care providers.

It’s also critical for organizations to know exactly what’s in their contract — and to work with an insurance carrier or a third-party administrator they can trust.

Insights Health Care is brought to you by Medical Mutual