A Whole New World

A Whole New World...

I'm torn between starting off with the saying "Be careful what you wish for" or "The times are changing...". Lately, it seems like the challenges keep piling up for companies grappling with managing employee benefits and the increasing costs. Each day brings news of insurance companies exiting the market, changing plans or altering their networks, Sometimes making it a daunting task to just find a suitable healthcare provider. While the talk of the Affordable Care Act (ACA) initially sparked hope for improved coverage at a lower cost, the reality we now face falls short of those expectations.

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Everything Old Is New Again

Once upon a time businesses were required to fill out extensive medical questionnaires in order to receive insurance quotes for their benefits. This process often proved to be a double-edged sword. If your company's demographics aligned with the insurance company's ideal group, you could enjoy favorable rates. However, if there was any discrepancy, your company may have ended up paying significantly more than your counterparts.

The Best of Both Worlds

There are a number of insurance companies that will now allow you to choose whether to use the ACA community rates or your own company's health information - But it doesn't happen automatically, you have to know to ask.

Flexible Tools

In addition to the traditional insurance coverage, some insurance companies are now offering what is referred to as, Level Funded or Partial Self Funded insurance plans. (These are concepts that have been around along time. But up until now, they were only available for really large employers. Now, groups as small as 3 employees can take advantage of these benefits.)

How Does it Work

The concept is so simple, it's genius. Employers share basic medical details about their staff. (Depending on the insurance provider, specific information may vary.) The insurer then predicts the expected claims and adjusts the coverage rates accordingly. Upon the annual renewal, if the insurer overestimated the claims (resulting in excess funds), they will reimburse a portion back to the group as a credit towards future premiums. In case of underestimation, the insurer covers the additional claims. In either scenario, it's a win-win situation for you.

So, What Does All Of This Mean To You?

Level funded plans (as well as many self-funded plans) provide employers with three key advantages: the opportunity for cost savings, increased options for tailoring plans, and decreased regulatory constraints.

Cost Savings

Although fully insured health plans do alleviate most of the risks for employers, they come at a higher cost. While the expenses of a fully insured plan are predictable for the plan year, rates may increase in subsequent years if area claims exceed what the carrier anticipated. Conversely, a self-insured plan places more risk on the employer but offers the potential for savings if claims are lower than premiums. Level funded health plans aim to blend the advantages of both options, making partial self-funding a more feasible choice for a larger group of employers, including small businesses.

Plan Design

Level funded and self-funded health plans offer employers enhanced flexibility in designing their plans, bypassing certain ACA regulations like the mandate for essential health benefits or adherence to the three-to-one rating formula. Furthermore, self-funded plans grant employers access to vital data for informed plan design, including claims details, healthcare cost metrics, utilization rates, and prescription specifics.

Regulation

Due to an exemption under the ACA, level funded and self-funded health plans (even for small groups) benefit from reduced regulatory requirements compared to traditional, fully insured plans. This often translates to a lighter administrative workload for small businesses with limited staffing resources, ultimately leading to lower overhead expenses.