3:30 minute read
FACT: Most employers are acutely aware that health care costs have been rapidly rising over the past fifteen years, significantly outpacing inflation (projected to hit a 5% increase in 2022).
FACT: Cutting these benefits all together, or, stripping it down to higher deductibles, shifted to the plan participants, your employees, is no longer an option.
FACT: Top Benefits When Considering a Job Decision: Health insurance benefits are now rated at the 73% level as far as importance to your (potential) employees. Retirement Savings 57%. Dental/Vision 26%. Life insurance 10% (source: Employee Benefits Research Institute).
Three Choices Employers Can Make:
First there is the traditional means to insuring. Circa 1980-something, where the insurance carrier takes on all of the risk, dictates premiums as well as holds close the vital data defining how your group used the plan. Unfortunately, this is the only way small (under 50 employees) employers can take when offering health insurance, in most cases.
“Self-insuring with training-wheels”, or, Level-Funding is a hybrid in-that this shares more of the risk with the employer. A great way to sort of wet your risk appetite for, more risk taking down the road, with self-insuring. Nothing to rush into. However, something that must be on the table to discover and talk thru.
Second. Self-insuring the health plan (aka: “Partially Self-Insuring”) has nicely established itself amongst those employers with as few as 50 employees on up. The stop-loss insurance which is a part to this continues to make this accessible.
Size isn’t necessarily the determinant as to whether a corporation self-insures or not. Understanding your group’s dynamics (employee health habits, employers appetite for risk, and present financial standing as an organization) all can help in moving forward with this.
Access to utilization, piecing the plan together with various components, based on your corporate culture, and annual fine-tuning of the plan are all available.
Did you realize plans can be designed to in-take claims at a pre-determined level? For example; Medicare rates, Regional-based Average rates, and lastly PPO (retail reduced rates)? Medicare rates are being used to set Referenced based Pricing within privately owned/employer health plans. States like Texas have moved quickly with is over the last 8 years. Wisconsin, for example, has been much more sluggish in seeing this flow smoothly. The upside, as much as 250% reductions in fees are seen in such plans. The downside. CAUTION: Very aggressive plan design that needs support and on-going employee education.
Regional-based Average fee schedules combine the Medicare base-line with the PPO retail base-line. A good first step in serious cost management.
Third. A Medical Stop-Loss Group Captive offers employer-members the best of both worlds by providing members the increased control of a self-funded program while still offering protection from catastrophic risks. Here are just a few of the benefits of a medical stop loss group captive:
- Allows small- to mid-sized companies to enjoy many of the perks of self-funding while also minimizing exposure to larger claims.
- Companies can enjoy control over their insurance program.
- Offers best-in-class companies the opportunity to leave the conventional market and share risks with like-minded organizations.
- Affords companies the opportunity to control many facets of their program — including premiums, TPAs, and plan details.
- Offers best-in-class events and the opportunity to interact with other members and share best practices.
- Affords companies opportunities to improve health management strategies.
- Provides companies greater transparency into the flow of dollars and loss drivers.
- Risk/reward model that rewards members for minimizing both frequency and large claims with dividends from unused underwriting dollars.
- Provides companies the ability to stabilize their health insurance costs.
Q: “What if we are fully insured but would like to look at a medical stop loss group captive?”
A: Not a typical move, however it does happen. You may not have a deep pool of data for serious review. Typically three years of renewals history is required in order to make a solid recommendation.
Q: “We are self-insured, and have a long history of confidential claims data to share with your underwriters.”
A: This is a good start. We do recommend a comprehensive feasibility study be conducted. This brings together all of the details; risks and rewards within the medical stop loss group captive.
- Discuss with members of your leadership, then with a seasoned insurance advisor-broker, and determine the upside and the downside to moving from fully insured to self-funding. Or, Self-funding to a Medical Stop Loss Group Captive.
- Gather at least three years of your group’s claims data.
- Prepare to participate in a feasibility study to help determine next steps in plan foundation (fully insured, self insured or captive structure).
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