Government, Health Care, and Law

Employers gravitate to self-insured health plans

More tailored plan design, avoidance of taxes are primary reasons for trend.

November 2, 2018
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(As seen on WZZM TV 13) There is an upward trend in the type of health plan some employers desire.

According to Robert Hughes, president of Grand Rapids-based Advantage Benefits Group — a full-service employee benefits agency — large companies with an employee base greater than 100 have been increasingly pursuing self-insured health plans, in part, because of the Affordable Care Act, which was passed in 2010.

“There are some taxes that you avoid when you are self-funded and you have more flexibility with plan design, which have pushed some companies to move over to self-funding,” Hughes said. “Plus, the ACA generally (increases) fully insured premiums. So, that makes self-funding even more attractive to some companies.”

Within the last three to four years, Hughes said he has noticed an increase in his own agency where clients are gravitating toward self-funding health insurance plans. He said about 60 percent of his clients have chosen to be self-insured.

He said some of the taxes employers can be exempt from have made self-insured health plans more popular. Under a self-insured health plan, some of the tax exemptions include an annual fee on health insurance, a risk adjustment administration fee and a marketplace user fee.

Aside from tax exemptions, employers have the liberty to only pay for the claims that their employees incur, as opposed to employers paying a fixed rate every month regardless of whether a company has fewer claims in a particular month when they are fully insured.

Dave Quinn, director of sales and client services for Priority Health in Grand Rapids, said it has become a well-liked plan because those companies can “spread the risk” factors that may arise if an employee suddenly develops a chronic illness.

It will have a minor effect on the amount in claims a company has to pay because, hypothetically, the funds that were saved because of the minimal number of claims reported in previous months can be used to cover the financial loss.

Another benefit for self-insured employers is they can design their health plan, as far as deductibles and co-payments are concerned. It also gives employers the right to know detailed health-related information about their employee population such as those who suffer from diabetes, high blood pressure and are pregnant, so they can accurately estimate the amount in claims they’ll be paying each month.

As a result of that uncertainty in the amount in claims self-funded employers will pay each month, Quinn said employers are offering more healthy resources that employees can take advantage of in an effort to minimize the number of claims they have to pay for.

“Wellness programs are pretty popular,” he said. “We have our own wellness department here. Wellness programs offer various services such as biometrics screening, exercise challenges and one of the biggest things that is growing are virtual visits.

“Virtual visits are when you are talking to an actual physician virtually. The cameras are so good on phones now you can have a video visit with a physician, who can prescribe medications for rashes and sore throats, for example. A lot of the self-funded plans (we have), unlike our fully-insured plans, it is a zero-cost item to the member. So that is a huge savings in time and cash for the member and it also saves money for the employers, too.”

While a self-insured health plan can be cheaper for larger companies with more than 500 employees, companies with about 100 employees have to take preventive measures to protect their company in case a situation arises where an employee succumbs to a severe medical illness, which increases the risk in the number of claims filed.

“Employers can buy stop-loss insurance that covers them and their large claims,” said EJ Pearson, regional sales executive for Varipro. “So, if there is a very large $10,000-plus claim, the stop-loss carrier will reimburse the employer. Therefore, it has protection for employers, so they are not paying every single claim.”

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