Small, mid­size em­ploy­ers flock­ing to self-fund­ing

More are em­brac­ing the in­sur­ance model, as firms re­al­ize cost sav­ings, plan flex­i­bil­ity and em­ployee sat­is­fac­tion.

Employee Benefit News - - CONTENTS - BY NATHAN SOL­HEIM

When Ernie Cle­venger sug­gested his com­pany, CareHere, move to self-funded health in­sur­ance, there were a few peo­ple, in­clud­ing the firm’s chief fi­nan­cial of­fi­cer, who had their reser­va­tions. “[The CFO] had worked with smaller com­pa­nies that were not self-funded, and she was con­cerned about cat­a­strophic claims that might oc­cur,” re­calls Cle­venger, CEO of CareHere, a provider of on-site health clin­ics based in Brent­wood, Tenn. It has a lit­tle more than 800 full-time em­ploy­ees with lo­ca­tions in 27 states. But as the self-funded health in­sur­ance op­tion at CareHere took off, the CFO saw how the com­pany ben­e­fited from the move, namely by low rate in­creases, very quickly. And now, three years into the pro­gram, the CFO — along with many oth­ers at CareHere — has be­come a pro­po­nent of self-funded in­sur­ance and even seeks out ways to im­ple­ment sim­i­lar so­lu­tions in other ar­eas of the com­pany’s ben­e­fits pack­age. CareHere is among a grow­ing num­ber of em­ploy­ers who have em­braced self-funded in­sur­ance, as com­pa­nies re­al­ize cost sav­ings, plan flex­i­bil­ity and em­ployee sat­is­fac­tion that can man­i­fest it­self as soon as the first year af­ter im­ple­men­ta­tion. Although self-in­sur­ance isn’t new — it be­gan back in the 1970s with larger em­ploy­ers ex­plor­ing new ways to man­age soar­ing health­care costs — the move­ment has spread to mid­size em­ploy­ers steadily as costs con­tin­ued to rise by dou­ble dig­its year af­ter year. More re­cently, the pas­sage of the Af­ford­able Care Act grad­u­ally helped spread self-fund­ing to small em­ploy­ers. “The pas­sage of the ACA had the in­di­rect re­sult of en­cour­ag­ing more em­ploy­ers to look at self-in­sur­ance,” says Michael Ferguson, pres­i­dent and CEO of Self In­sur­ance In­sti­tute of Amer­ica. “Gen­er­ally speak­ing, we can say that the ACA has cre­ated in­creased pric­ing for mid-mar­ket em­ploy­ers and cre­ated un­cer­tainty in the mar­ket­place for em­ploy­ers who want to pro­vide the ben­e­fit.” To­day, more than 90 mil­lion em­ploy­ees get health ben­e­fits through self-funded plans.

The trend to­day

A look at re­cent num­bers for self-in­sur­ance re­veals not only ACA’s im­pact, but also some in­ter­est­ing find­ings about the state of self-fund­ing among em­ploy­ers. A Fe­bru­ary study by the Em­ployee Ben­e­fit Re­search In­sti­tute found that the per­cent­age of smaller em­ploy­ers with at least one self-in­sured plan in­creased be­tween 2015 and 2016 while self-in­sur­ance in larger em­ploy­ers de­clined over that same time pe­riod. EBRI’s re­search also found that over­all en­roll­ment in self-in­sured plans fell just slightly from 60% to 57.8% be­tween 2015 and 2016. Breaking down the num­bers a lit­tle fur­ther, EBRI found that the per­cent­age of small firms, with fewer than 100 em­ploy­ees, of­fer­ing self-funded plans rose from 14.2% in 2015 to 17.4% in 2016.

“When the ACA passed, the ex­pec­ta­tion was that more small em­ploy­ers would go the self-in­sur­ance route,” says Paul Fron­tin, direc­tor of the Health Ed­u­ca­tion and Re­search Pro­gram at EBRI. “The ACA was ex­pected to raise costs and the ex­pec­ta­tion was that was go­ing to drive small em­ploy­ers to save money. That’s ex­actly what we’re see­ing hap­pen. It’s not tak­ing off like the space shuttle, but it’s tak­ing off like an air­plane. It’s just barely off the ground. We might be see­ing the be­gin­ning of a trend.” Mean­while, the num­ber of mid­size es­tab­lish­ments of­fer­ing a self-in­sured plan dropped slightly from 30.1% to 29.2%. Fron­tin notes, how­ever, that dur­ing the two years be­fore 2016, mid­size em­ploy­ers saw gains in the num­ber of self-in­sured em­ploy­ers, not­ing that set­backs are com­mon in long-term trends. “A drop like this could be that we’re reach­ing cruis­ing al­ti­tude,” Fron­tin says. And, for large es­tab­lish­ments of­fer­ing self-in­sured op­tions, the per­cent­age de­clined from 80.4% to 78.5% over the same time pe­riod. Fron­tin warned not to read too much into these num­bers at this time. “I’m not con­vinced that’s the be­gin­ning of a trend,” Fron­tin says. “It’s hard to imag­ine large em­ploy­ers go­ing back to fully in­sured in a ma­jor way. I would guess it’s a sta­tis­ti­cal anom­aly, there’s not a ra­tio­nal rea­son to see a drop.”

The Tel­li­gen track

While EBRI’s find­ings may show a bit of a di­chotomy in re­cent self-in­sur­ance stats, the re­sults couldn’t be more con­crete for Tel­li­gen, a Des Moines, Iowa-based health man­age­ment and well­ness so­lu­tions com­pany with about 700 em­ploy­ees. Five years ago, the com­pany de­cided to move to self-in­sur­ance. Their sit­u­a­tion was some­what unique — Tel­li­gen is a 100% em­ployee-owned com­pany. Ac­cord­ing to Doug Ventling, Tel­li­gen’s vice pres­i­dent of health and well­be­ing, the com­pany had ex­pe­ri­enced dou­ble-digit in­creases in their fully in­sured plans for sev­eral years thanks to high­cost claimants, em­ployee lifestyle and pharmacy costs. To rein in costs, Tel­li­gen ini­tially took the tra­di­tional routes to man­age their fully in­sured plan. Man­age­ment looked at plan de­sign but found it only shifted costs to their em­ploy­ees. It also looked at how to man­age the plan more ef­fi­ciently and con­sid­ered tak­ing mea­sures to im­prove em­ployee health. But af­ter con­sul­ta­tion with ben­e­fits con­sul- tants, Tel­li­gen made the switch. “Those in­creases were be­gin­ning to im­pact our com­pet­i­tive­ness,” Ventling re­calls. “We clearly saw a di­rect im­pact on our fi­nan­cial re­sults.” So far, Tel­li­gen has re­al­ized an over­all re­duc­tion in health in­sur­ance costs. In fact, the year af­ter they im­ple­mented the plan, the com­pany had a 3% de­crease in health plan costs af­ter an ad­just­ment for a phe­nom­e­non known as the “run-out” — a pe­riod of time where em­ploy­ees make claims on the old plan. With­out the run-out, Ventling says, costs would have de­creased 9%. The next year — 2015 – Tel­li­gen saw a 4% de­crease in health costs. In 2016, how­ever, Tel­li­gen hit a speed bump — health costs spiked 11.2% due to some high claims. “That hap­pens with self-funded,” Ventling says. “We’re at the whim of sta­tis­ti­cal chance. Some­times, a su­per-high claim could af­fect our re­sults. We had some very com­plex claims sit­u­a­tions. But you have to look at the long-game in self-funded. You’re go­ing to have good years and bad years. With proper re­serv­ing, you can weather the bad years rel­a­tively eas­ily.” The fol­low­ing year — 2017 — Tel­li­gen’s costs con­tin­ued their down­ward trend with a drop of 15%. “We were so tick­led with our re­sults last year that we gave our em­ploy­ees a premium hol­i­day [mean­ing em­ploy­ees didn’t have to pay pre­mi­ums] in De­cem­ber,” Ventling says. “Be­com­ing self-funded en­abled us to di­rectly share the re­sults back with our em­ploy­ees. It was kind of nice.” Tel­li­gen’s de­ci­sion went beyond dol­lars and sense, too. Ventling says part of Tel­li­gen’s strat­egy was to im­prove em­ployee health. Along with the move to self-fund­ing, Tel­li­gen ini­ti­ated a ro­bust well­ness pro­gram — a model the com­pany helps in­stall for its clients. Ini­ti­at­ing such a plan in a fully in­sured en­vi­ron­ment would have been more dif­fi­cult, Ventling says. “As long as we were look­ing at fully in­sured, we were un­able to im­prove em­ployee health,” Ventling says. “With a fully in­sured plan, we didn’t have the flex­i­bil­ity that would change the tra­jec­tory of our health pop­u­la­tion. When we eval­u­ated mov­ing to self-funded, we con­sid­ered the fi­nan­cial risks and weighed the op­por­tu­nity to de­ploy health man­age­ment and well­ness so­lu­tions to im­prove our em­ploy­ees’ health. We knew there was fi­nan­cial risk but we had to break free from be­ing fully in­sured to de­ploy our health man­age­ment so­lu­tions.” Be­cause Tel­li­gen is em­ployee-owned, the com­pany sought in­put from its stake­hold­ers and openly com­mu­ni­cated with the work­force through­out the de­ci­sion-mak­ing process. Tel­li­gen ex­ec­u­tives used trans­parency to ex­plain why it was im­por­tant to cut costs. They also shared what the health ben­e­fit would look like af­ter the move to self-fund­ing. Ventling says that af­ter im­ple­men­ta­tion, costs were re­duced sig­nif­i­cantly enough that the share price for the com­pany rose, too. For Tel­li­gen em­ploy­ees, the in­crease in share price equates to an in­crease in their re­tire­ment plan. Tel­li­gent con­tin­ues to be trans­par­ent with its fi­nan­cials re­lated to the health plan. For Cle­venger’s part, the move to self-fund­ing pro­vided cost sav­ings as well. CareHere was able to pay a greater share of his com­pany’s fam­ily op­tion. Cle­venger also says the self-funded health in­sur­ance plan at his com­pany al­lows him to build health ben­e­fits across the na­tion, which helps his com­pany com­pete for em­ploy­ees in all their mar­kets. “Be­cause we are national in scope, we have to be com­pet­i­tive within pock­ets of the coun­try,” Cle­venger says. “Ben­e­fits in Chicago are dif­fer­ent from ben­e­fits in Den­ver, which are dif­fer­ent than ben­e­fits in Butte, Mont. We can tai­lor our plans to meet more of the national norms.” Cle­venger adds that self-funded plans al­low for more flex­i­bil­ity to of­fer and re­move ben­e­fits. CareHere, for ex­am­ple, is adding a telemedicine ben­e­fit for its em­ploy­ees. Such a move, he says, would take more time and cost more in a fully in­sured en­vi­ron­ment.

Turn­ing to­ward self-in­sur­ance

Any em­ployer con­sid­er­ing self-fund­ing will have sev­eral chal­lenges to con­tend with. A move from fully in­sured pro­grams means em­ploy­ers will largely be free of state reg­u­la­tions, but will take on re­spon­si­bil­ity for com­pli­ance with sev­eral sets of fed­eral reg­u­la­tions, in­clud­ing ERISA, HIPAA, the ACA and pro­tected health in­for­ma­tion, or PHI. Em­ploy­ers also will need to se­lect ap­pro­pri­ate stop-loss poli­cies and strongly con­sider the or­ga­ni­za­tion’s risk tol­er­ance. Reg­u­la­tions per­tain­ing to self-in­sur­ance also re­quire dis­clo­sures to em­ploy­ees and reg­u­la­tory au­thor­i­ties. Cle­venger says em­ploy­ers also should as­sess

“Be­com­ing self-funded en­abled us to di­rectly share the re­sults back with our em­ploy­ees.”

their ap­proach to deal­ing with volatil­ity. “You may have three great years and then one year with a lot of claims,” Cle­venger says. “If you make a de­ci­sion year by year by year, that’s kind of like tim­ing the mar­ket and think­ing you can pick stocks bet­ter than the mar­ket. You have to look at the re­turn over time.” Ventling rec­om­mends part­ner­ing with fi­nance de­part­ments early in the process and be pre­pared to au­dit the plan reg­u­larly for com­pli­ance with reg­u­la­tions and the sto­ploss car­rier. “The big­gest change or con­sid­er­a­tion was how we man­aged the plan and an­a­lyzed our data from a claims as well as fi­nan­cial per­spec­tive,” Ventling says. “Be­ing self-funded, we had the re­spon­si­bil­ity to en­sure we were se­lect­ing the ap­pro­pri­ate stop-loss lev­els — in­di­vid­ual and ag­gre­gate — and as­sess­ing our own risk tol­er­ance. Also, there’s a whole new set of ter­mi­nol­ogy you need to learn as well as data points avail­able. But pos­i­tively, with more data comes the abil­ity to make bet­ter in­formed plan de­sign de­ci­sions as well as more fo­cused health man­age­ment in­ter­ven­tions. You have an op­por­tu­nity to spend your money more wisely.”

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.