BENEFITS AND RISKS OF BEING
SELF-INSURED
LINCOLN COUNTY COMMISSIONER ROB COFFMAN
AGENDA
 Understanding Health Plan Self-Funding
 Advantages and Disadvantages of Self-Funding
 Individual v. Joint (Multi-Employer) Plans
 Healthcare Environment Post – ACA
 Questions?
SELF-INSURINGSelf-Funding
HEALTH PLANS
Understanding
 Self-Funding treats predictable claim cost as expenses rather than insurable risk.
 Under a Self-Funded plan model an employer determines the amount of risk
appropriate for their organization.
 Employers purchase Stop Loss Insurance to protect against unknown and
unpredictable catastrophic claims.
 Self-Funded plans are governed by Federal ERISA instead of State insurance laws.
 Governmental agencies like counties and municipals, however, are also subject to
rules from the State Risk Manager’s Office (RCW 48.62.011)
SELF-INSURING
HEALTH
PLANS
What
is Stop Loss
Insurance
Purpose:
 To provide financial protection to a Self-Funded plan sponsor
 Provides protection against a catastrophic event or from abnormally high
frequency/severity
 Severe high dollar claims such as cancer, transplants and dialysis are considered
“shock loss” claims
 The Stop Loss contract insures the Employer not the Employee
 The medical plan established by the Employer accepts the responsibility for
paying providers claims but limits it’s risk with Stop Loss
Advantages & Disadvantages of Self-Funded
Health Plans
 Not subject to premium taxes
 Not subject to state benefit mandates
 No insurer profit margin built into rates
 No broker commissions on full plan
 Pay only for desired services
 Greater control over plan design
 Employer maintains claims reserves
 Access to claims data
 Requires long-term commitment
 More internal administration
 More involvement in plan design decisions
 Must contract for claims, other services
 PPO discounts may be less than insurers'
 Increased fiduciary liability
 Variable financial risk
 Still subject to ever increasing cost of healthcare claims
(no magic bullet)
 Limits the number of experienced consulting brokers
 Independent claims and disease management
available
 TPAs offer more services than insurers
 Full Credit for wellness savings
SELF-INSURING
HEALTH PLANS
Weighing
the Benefits
Risk Management – Charges, Commissions and Retentions
 A Self-Funded health plan can allocate more of each dollar toward payment of
medical claims through eliminating commissions, risk charges and insurer profit.
Improved Cash Flow
 Fully insured premiums are a form of pre-payment
 Self-Funded plans pay as you go
Innovative Plan Document Design and Control
 Freedom from state mandated benefit laws allows for flexibility in plan design
 Benefits can be tailored to the working population
SELF-INSURING
HEALTH PLANS
Weighing
the Benefits
Plan Sponsor’s Experience
 Employer is responsible only for the risks presented by members of the plan
Risk Control
 Stop Loss coverage can limit the employers risk while allowing it to retain
control over claims and benefits
Value-Based Benefits and Wellness Programs
 Flexibility to design health risk assessment & prevention and wellness tailored
to the groups demographics
Improved Claims Data History
 Software and investigative techniques can help curtail spending
Savings Opportunities
 Utilization of cost containment features increases savings opportunities
SELF-INSURING
HEALTH PLANS
Self-Funding
for Washington
Counties
Chapter 48.62 RCW provides authority for local
governments to individually or jointly self-insure health
care, accident, disability, death, and salary protection
benefits. RCW 48.62.011 requires prior approval for
the establishment of every individual and joint local
government self-insured employee health and welfare
benefit program. RCW 48.62.071 requires that specific
information is submitted to the state risk manager for
program approval.
Individual
v. JointHEALTH
(Multi-Employer)
Plans
SELF-INSURING
PLANS
Individual (Single-Employer) Self-Funding
 Must hold 8 weeks of total expected plan expenses in reserve
 Report annually to State – Report Form is located on the Local Government
Self-Insurance Program website
 Aggregate Stop-Loss recommended
Joint (Multi-Employer)
 Must hold 16 weeks of total expected plan expenses in reserve
 Must also submit, as part of the Annual Report, prepared financial statement
 In addition, audited financial statements must be provided to the State Risk
Manager
 Aggregate Stop-Loss required
Changing
Landscape
of Self-Funding
SELF-INSURING
HEALTH
PLANS
 According to Pricewaterhouse Coopers data, the percentage of Self-
Insured employers with fewer than 1,000 people in their health plan
programs has almost doubled – from 29% in 2008 to 48% in 2010
 According to 2011 Kaiser/HRET survey of Employer/Sponsored Health
Benefits, 60% of companies Self-Insure their health benefit programs, up
from 49% in 2000
 DOL Confirmed Staggering Savings under Self-Funding
 Deloitte Advanced Analytical Consulting Group was quoted in a recent
Department of Labor (DOL) report that fully insured premiums increased by
$808 while self-funding only increased by $248, a difference of 326% in 2011
Current
Healthcare
Environment
SELF-INSURING
HEALTH
PLANS
Accountable Care Act
 Health care reform was enacted March 23, 2010
 Self-Insured plans are exempted from some ACA reforms that apply specifically
to insurers such as medical loss ratio (MLR) standards, rating restriction rules,
and insurer fees
 ACA provisions specifically applicable to “small employers” range from: fewer
than 26 employees for tax credit eligibility to 100 employees or less to qualify
for exchanges
 Self-Funded is cost effective at a time when traditional insurance is predicted to
become more costly due to ACA.
2014
What to Expect
SELF-INSURING
HEALTH PLANS
1.
State health insurance exchanges established
2.
Medicaid eligibility expands
3.
Large employers (50+ employees) must provide health plan or pay a fine
4.
Individuals must secure health coverage or pay penalty tax
5.
Automatic enrollment of full-time employees in an employer’s health plan required
(200+ employees)
6.
No pre-existing condition exclusion allowed
7.
Waiting period limited to 90 days
8.
Cost-sharing amounts capped and annual limits removed
9.
Maximum health premium discount for wellness program participation increased from
20-30%
10. Group health plan must report coverage by individual to IRS
11. Self-Insured plans will have to maintain certain levels of coverage in order to meet the
threshold of a qualified health plan
12. Non-discrimination rules will apply to fully-insured plans
Questions?
SELF-INSURING HEALTH PLANS
Rob Coffman
County Commissioner
Lincoln County
509-725-3031
rcoffman@co.lincoln.wa.us
Dan Fisher, CEO
EmSpring
877-550-0088
dan.fisher@emspring.com