A growing number of businesses are turning toward self-funded healthcare plans due to the increased flexibility compared to other insurance types. While most self-funded healthcare plans require over 100 employees, at Health In Tech, we only require five, increasing employers’ flexibility when selecting their insurance plans. While enrolling in self-funded healthcare isn’t always seamless, it is worthwhile. Self-funded health plans continue to rise in popularity, with 65% of covered workers enrolled in this type of plan. As their popularity increases, it’s essential to understand the self-funded healthcare mistakes to avoid and to be aware of the misconceptions. Keep reading to learn more.
Viewing Self-Funded as a Short-Term Solution
Self-funded healthcare solutions should not be considered short-term. Employers should take a long-term approach to this solution. In some instances, employers may exceed the amount of the claims budgeted for, decide the risks aren’t worth it, and transition back to a fully insured plan. This is a mistake, and employers should give the self-funded plan time instead. Claims fluctuate, and there is a risk that employers must know about before deciding to switch, which we’ll discuss later. Employers should instead appreciate the enhanced flexibility and opportunity to exercise more discretion in designing their plans. There are also numerous benefits that self-funded plans provide that fully insured plans do not, including the following.
No Pooling Risk
Self-funded health plans are covered by the federal Employee Retirement Income Security Act (ERISA), which sets minimum standards for most voluntarily established retirement and health plans in the private industry to provide protection. Additionally, employers with multi-state or national offices can refrain from complying with some state-specific regulations. To learn more about ERISA compliance for health plans, click here.
Since the risk pool is limited to enrolled participants, there is no need for the same pooling that traditional plans encounter, meaning your plan will not have to pay more to absorb the risk of other plans, which can also be costlier.
No Profit Margin
The employer is running the plan, meaning no carrier is making a profit from the payments. Instead, employers can use the additional capital to reduce contribution rates going forward or increase their plan coverage.
Lower Administrative Fees
Self-funded plans pay for claims processing, stop-loss insurance coverage, and networking contract drafting, either in house or through a TPA, lowering your overall administrative fees.
Not Performing Periodic Claims Audit
All businesses should perform periodic claims audits; however, this is an area that the Department of Labor reviews under ERISA, making it especially crucial for companies utilizing self-funded health plans. The audits allow the employer to monitor and improve claims processing and overall payments. Additionally, the audits are not focused on one specific area but on every aspect of the claims process providing employers with a holistic view. The claims audits, however, are laborious, so it’s essential to have a plan before getting started. Testing at least 1,000 claims is advised, but some businesses test only about 400-500.
Audit Pitfalls to Avoid
There are several mistakes within the claims process to be wary of. Those include not providing the audit team with sufficient access, not pulling complete claims, not comprehensively understanding provider contracts, and forgetting to review fee schedules. To avoid these issues, it’s crucial to plan ahead, ensure everyone is on the same page, and allow yourself time to sufficiently complete all the steps rather than rushing to complete them.
Neglecting to Plan for Fluctuations
Claims constantly fluctuate, and employers utilizing self-funded healthcare plans must be prepared for this and plan ahead. Self-funded plans set budget rates to predict 12-month cycles, but month-to-month fluctuations are essential for consideration.
Self-Funded Healthcare Misconceptions
Despite the known benefits of up-front cost-savings, tax benefits, and avoiding state laws, many misconceptions surround self-funded healthcare plans. Below we’ve broken down some of the most common misconceptions and explained them further.
Self-Funded Plans Aren’t Cost-Effective
This is simply untrue; in fact, not only are self-funded plans affordable, but they save employers money. While many believe the employer must put up a significant amount of money on the spot, they actually pay monthly. The monthly sum takes into account workforce size and employee needs.
Additionally, when enrolled in a fully-funded plan, companies only get money back if they use up their entire premium. With self-funded plans, companies can get money back at the end of the year.
Self-Funded Plans Only Make Sense for Large Companies
Self-funded plans are not only beneficial for large companies, which is why at Health In Tech, you only need five employees! The money and time-saving benefits are not exclusive to large businesses, so these plans are great for companies of all sizes. Additionally, smaller companies can cut operational costs for these plans if they work with a third-party administrator (TPA).
Self-Funded Plans are Limited and Don’t Provide Flexibility
With an experienced TPA and a partnership with Health In Tech, your self-funded plans can be flexible and customizable. In fact, our eDIYBS system can create a proposal with 12 different plans and 4 tier rates in two minutes, allowing you to quote, bind, and enroll your group almost instantly. The program can also reduce sales time by 90%, meaning brokers can now underwrite hundreds of groups daily. The platform is not only efficient but incredibly user-friendly, taking less than 30 minutes of training. You can even personalize your proposal with company logos and contact information. Contact us to learn more about our eDIYBS system or our other healthcare offerings.
Self-Funded Healthcare Mistakes to Avoid by Easy by Partnering with Health In Tech
At Health In Tech, we work to ensure transparency, efficiency, and ease in your healthcare plans. We know how to streamline self-funded health insurance plans and provide cradle-to-grave solutions to ensure everyone has access to actionable data and tools. To learn more about our offerings or learn more about self-funded healthcare mistakes to avoid, visit our website or contact us to learn more.