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Self-funding information for health and other benefits
- Why Should I Consider Self-Funding My Company's/Organization's Health/Dental Benefits?
- How Does Self-Funding Work?
- How Do I Find An Ideal Set of Partners?
Why Should I Consider Self-Funding My Company's/Organization's Health/Dental Benefits?
There are three reasons why you should self-fund your health or dental plan. First, self-funding causes an increase in cash flow. Second, it allows a company more flexibility when organizing a health plan. Third, by self-funding companies will notice that it will save money in the long run.
Cash Flow Considerations
- Fund your claims as they are reported rather than through a monthly premium
- Your claims liability is capped on an individual member and on a total group basis through a reinsurance arrangement
- If claims are less than the expected amount, savings are accumulated in your accounts
- If claims are more than the expected amount, you are reimbursed by the reinsurer. Since you control your funds longer into the year, you could earn more interest on your money
- Plan Designs - Self-Funding allows you the freedom to design your own plans. This gives a company the ability to delete benefits (i.e. state mandated) and add benefits (i.e. wellness programs) as they see fit
- Monitoring - Know where your money is going by monitoring your own groups experience by finding out how employees are filing claims and what type of claims are being incurred
- TPA's, third party administrators charge less money to process your claims than insurance companies
- An insurance company requires a profit to take the risk in paying your claims. This profit is eliminated
- By designing your own benefit plan, you can avoid coverages that were required by either the insurance company or the state
Premium tax is eliminated since insurance company premiums are eliminated.
- Find A Broker/Consultant which will do the following for you:
- help to assemble a team
- evaluate managed care network and utilization review providers
- create a plan design specific for your company/organization
- negotiate and evaluate cost and trade offs
- You and the broker/consultant select an administrator which will provide the following services:
- write and distribute the selected plan description to your employees
- enroll interested employees into the selected plan
- assemble a dedicated team to pay claims and provide support to your employees
- You, your broker/consultant and administrator select a stop loss carrier which will provide the following services:
- re-insurance to limit your risk of unexpected medical claims
- provide special resources for management of catastrophic plans
- supply special resources for other issues that arise (i.e. legal, medical, and administrative)
- You, the administrator, and the stop loss carrier choose a payment process
- Working together a process that will ultimately optimize the sequence of events leading to a payment should be designed
- Decide where the medical bills get submitted to, i.e. the administrator or to the employee
- Set up a process for electronic claims submission
- Implement pre-funding programs for catastrophic illness
- Establish other procedures to reduce variability in program costs to the employer
- Provide a means for the employer to be able to measure cash flow
- You and the administrator should keep the employees informed by holding educational meetings for the employer’s employees, satisfaction of a plan can be maximized by:
- carefully explaining the features and the benefits of the plan
- preparing employees for interaction with the plan for common medical events
- discussing with employees how they can get their questions answered by using customer service
- The administrator and the stop loss carrier should monitor the plan. Together they should monitor the plan so that any key improvements can be made in a timely manner. Monitoring should include:
- consistently assessing the cost of medical care being provided to the employer’s employees
- suggesting improvements for future medical cost
- measuring the quality of services being provided by the medical outcomes
- evaluating employee satisfaction
- periodically reviewing with senior management to insure that the program meets the needs of their employees
A properly designed self-funded plan could have as little paper work for the employer and employee as an HMO.
The following describes how the claims process could work if the employer wants minimal paper work for the employer and the employee.
- Normal Claim (Provided that the employees are informed about the benefits that are provided by the plan.)
- A member of the plan visits the provider
- The member of the plan (patient) obtains the services and then pays the provider the co-pay. The provider will submit the claim to the employer’s administrator
- Catastrophic Claim
- A member of the plan visits the provider
- The member of the plan (patient) obtains the services and then pays the provider the CO-pay The provider will submit the claim to the employer’s administrator
- The provider suggest a specialist or admits the patient to the hospital. The patient must notify the employer’s administrator so that the reinsurance company can be informed
- To insure the proper managed care, the re-insurer will put into effect all of the pre-negotiated pre-funding components
- Claims are submitted to the employer’s administrator. The employer is responsible for the amount up to their deductible/stop loss. Any amount in excess of the deductible/stop loss will be submitted to the stop loss carrier
- At this point, the employer’s administrator can ask to set up interim billing so that the employer can make periodic payment
- You are a good candidate for self-funding your health plan if you have 50 or more employees and one of the following facts applies to you:
- Your current insured plan is inflexible with respect to benefit plans and benefits
- You are looking to reduce costs with respect to health care benefits
- You are looking to initiate more effective cost containment problems
- You need better information on where your dollars are going
How Do I Find An Ideal Set of Partners?
Five questions to Ask Your Stop Loss Carrier
1. What is the carrier's A. M. Best rating?
A.M. Best is the oldest and most commonly used rating agency. These ratings represent an independent opinion of the carrier's financial strength and ability to pay claims. The Top ratings are A++ and A+. Both ratings are given the distinction of being superior.
2. What is your carrier's renewal policy?
Quality stop loss carriers will guarantee to renew their policy regardless of claim experience. Some carriers will guarantee a renewal subject to lasering (not covering) potentially high claimants. Quality stop loss carriers will not laser upon renewal.
3. How quickly will you be reimbursed for claims?
Since specific stop loss contracts protect against catastrophic claims, quick claim turnaround by the carrier is critical to the employer to protect against financial strain. The industry standard is 10 days for specific stop loss reimbursement and 45 days for aggregate stop loss. Quality carriers will reimburse specific stop loss claims within five days.
4. Will the stop loss carrier advance fund specific stop loss claims?
Most stop loss carriers require an employer to totally pay a claim before reimbursement will be considered. This could be a tremendous financial burden to the employer. Good carriers will begin paying claims (advance fund) after the employer has satisfied the deductible plus $10,000. Quality carriers will waive the $10,000 criterion.
5. Does the stop loss policy have any exclusions?
Many stop loss carriers have policies that exclude (or cap) reimbursement for certain claims (usually transplants). This creates a significant liability for the employer. Quality carriers will have a policy that mirrors the employer's plan document.
Questions that should be answered when assessing a TPA service
1. Is the claim system automated?
There are many acceptable claim paying systems in the marketplace. It is probable most important that the process is automated to catch duplicate charges, charges in excess of reasonable and customary, etc. The systems' reporting capabilities must also have the ability to provide you the necessary reporting to manage your plan.
2. What reports will I need?
With the increasing sophistication of claim paying systems, the ability to report claims data can be virtually limitless. Usually, the standard reports would include monthly claim summaries, large claim reports, claims by service category, claims by specific providers, and claims by diagnostic categories. Some administrators will also have the ability to provide customized reporting to meet additional policyholder needs.
3. How many employee lives does the TPA administer?
This will give you an idea of the TPA's size. A TPA with anything above 10,000 employee lives would be considered to be a sizable TPA.
4. Does the TPA have Errors & Omissions coverage and a fidelity bond with professional liability coverage?
Most TPAs will have at least $500,000 of each of these coverages. These will protect the plan against legal actions taken by employees and negligence or fraud by the administrators or employees.
5. Is the TPA licensed in your state to administer benefits?
Not all states require TPAs to be licensed. Your broker can tell you whether or not a license is required in your state.
6. Does the TPA have access to Top-rated carriers?
Most TPAs will have relationships with many stop loss carriers. This is one of the strengths of this type of benefits delivery program. The carrier selection can be critical to the success of a self-funded plan, so having access to strong carriers is very important.
7. Who will be adjudicating our claims?
Some administrators have "dedicated processors," meaning that you have one person to contact for any claims issues for more personal service. Also, some TPAs will have extended service hours so that policyholder employees con handle benefit questions at times other than normal business hours. Further, the expertise of the TPA's claim processors can be very important. Processing experience averaging more than two years for a TPA would be seen as good.
8. How long does it take for my claims to be paid?
Normal "turnaround" for a claim for most TPAs would be 10-15 business days. Anything under 10 would be considered good.
If you would like more information about self funding information for health and other benefits, please contact us at 888-669-4883, or email us at info@benico.com.
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