How To Get the Benefits of Self-Funding Without The Risks:
“Partially self-insuring” – The term used to describe a group healthcare option midway between traditional group insurance and self-funding your organization’s health insurance. Partial self insurance or partial self-funding is an option and strategy designed to realize the greatest savings on health insurance while keeping the organization, and its staff, as safe from risk as possible.
The risks associated with partial self insurance are what we call small, manageable risks (usually up to $5,000) compared to the much larger risks associated with self-funding (which could equal $100,000 or more in the same year).
The option relies on using a traditional international health plan as it’s foundation, although using plan summary description and a well-thought-out plan design to create high deductible alternatives (to traditional quotes or rates) that drive costs down (to the organization) compared to traditional group plans. The group continues to charge employees/themselves the same amount for coverage as before, and uses the difference to create and grow a reserve account that will then pay for (self-funds) the high deductible difference, so that the employee see no difference in their cost for treatment. (Or even will see savings, getting better care/cost. In our plan designs, we usually lower the amount the individual pays to $0.00)
The “secret sauce” to this type of hybrid insurance plan is the experience that creates a plan design to keep claims from going up, so that you can ‘freeze’ annual premium “rate ups” (increases) for employees and use reserves to pay for those (slight, if done properly) increases. If done incorrectly, claims will cause annual increases that will absorb those same reserves, so that basically you are simply self-funding a traditional insurance plan albeit in a different way, without many of the benefits we will show you how to create.
In the insurance industry terms are not always well-defined or regulated. Some define “partial self-funding” as self-funded, but with a stop-loss policy in place. And “self-funding” as fully covering your own claims without a stop-loss policy. At GNI, we expect all groups that self-fund to have stop-loss (“self-funded” pure and simple) and we call those without stop-loss protection “fully self-funded.”
At GNI, we define hybrid plans like the one proposed here as “partially self-funded” or “partially self-insured” products.
Since you are creating a reserve account and partially paying claims, does that mean that these high-deductible plans are “self-funded?” No. These plans offer complete protection since they rely on traditional insurance plans, and offer the same valuable features as those plans (such as international medical and claims expertise, as well as access to networks) however, at drastically lower rates. It is the underlying structure and compliance with ERISA or state law which determines what plan is considered self-funded and what is not.
Partial self insurance (or partial self-funded) plans are fully-insured products without the risks associated with self-funded plans. And while most organizations would say they are choosing to self-fund or partially self-insure in order to save money, one benefit to partially self-insuring (or self funding) is they then end up designing a more useful/valuable plan for their staff for less cost than their old coverage. This plan design and all the additional benefits (such as $0 deductible) demonstrates to staff that you are not cutting benefits and helps with staff “buy-in.”
As mentioned above, cost controls must be factored in or claims will drive up premiums (at renewal time) so that there is no longer any savings associated with having these reserves. Also, knowing exactly how much to set aside for reserves and what to bonus back to employees in terms of lowered premiums, or increased benefits, is tricky and one reason Good Neighbor Insurance partnered in January 2014 with consultants who have been doing this exact thing for more than a decade – Showing non-profits and Christian schools as well as sending agencies and social businesses how to create a “win/win” situation in the midst of rising healthcare costs.
EXPERIENCE = TRACK RECORD = REAL WORLD SAVINGS
Their track record speaks for itself, as does the list of clients they serve.
Their clients’ average annual increase is amazingly just under 3% – In a world where the industry trend is 12-14% increase!
Client companies have had opportunity to build large reserves using this method to control costs, improve their cash flow, provide better coverage, reduce employees expenditure, and move into self-funded plans after gaining valuable experience and building the reserves required.
While partial self insurance can be “a means to an ends” for some (planning to transition to self-funded once they are ready), we have been seeing more and more boards and management begin the process by choosing to be partially self-insured/self-funded and after a bit of time adjusting to the new plan design and features, realize that the risks associated with self-funding simply do not warrant the additional control/savings they would realize. Either way, the importance of plan design, and for staff to take responsibility to help themselves save money/have better healthcare, is invaluable to partially self-insured plans. We have found that without the right plan design, and ownership by all those with vested interest, no healthcare option – Traditional, Partially self-insured, or Self-funded – will succeed.
- Partial self insurance is not for everyone – Generally groups need to have at least 25 or more staff, with 50 being best.
- With the right plan design, and less time than required by self-funded plans, you can partially self-fund a traditional international insurance plan using high deductibles to lower your rates. Then in turn, use those savings to fund a reserve account that can be used to “fix” costs year over year. With the right mixture of benefits, plan design and education you control behavior, which drives claims, in order to keep renewal rates sustainable. While trying this on your own may achieve some great results, we’d like to prove to you that partial self-insuring through Good Neighbor Insurance, and our stellar carriers, is the “Golden Mean” between other health options currently available to international organizations.
- For creating positive cash flow and flexibility in reserves, freedom to move accounts/choose your healthcare options, freedom to design a benefits package, as well as to prepare for the future and protect your organization from catastrophic and chronic claims that can make self-funding options unsustainable, we recommend calling and seeing if the numbers add up. Wouldn’t it be nice to save anywhere from $18,000 to $400,000 annually while controlling future rate increases AND creating a better, more fully-protected health plan for your workers? Don’t they deserve the best healthcare you can afford? Shouldn’t you at least investigate and learn more?
People always think we’re crazy, but we guarantee that if you call, the time spent will be time “well spent” (invested wisely) and that you’ll be telling other groups what we’ll show you, once we’ve sat down together for an hour or two.