Approximately 150 million Americans are covered under private employer sponsored health insurance and more than 50% of them are insured through self-funded health plans.
With 77 million individuals in the US covered by self-funded plans, an increase of 20% from 2008 to 2010, it is clear that self-funding is an increasingly popular option for many employers.
Employers choosing to self-fund their health plans have the following advantages:
- Self funded plans have lower administrative costs with better cash flow created by paying claims as they occur. Avoiding Insurance company profit margins and risk charges allow companies to have more control over costs. Employers often find that administrative costs for a self-funded plan through a third party administrator are lower than those being charged by a carrier under a fully-insured program.
- Self-funded employers are afforded more flexibility in the design of their benefit plans. This helps to control of cost, quality and levels of service for each component of their plan.
- Decision making on what to include and how to adjust spending on certain aspects of the benefit plan can be directly determined by data received from utilization reports and claim information.
- Self-funded plans incur lower taxes than other health plans. In most states, there is no premium tax applied to the employer's claim fund, thus an immediate savings equal to the amount of the premium tax (approximately 2% to 3%) is realized.
- Funds usually held by the insurance carrier in various reserves are available for use by self-funded employers. The employer controls the reserve if the claims expense is less than expected, the employer benefits financially.
- By choosing the right administrator, employers can design a service plan that meets their needs. A third party Health Plan Administrator may have several programs available (i.e., hospital bill audits, large case management, various service levels, provider networks and detailed reporting) that an insurance carrier would not be able to provide.
Employers with self-fund health plans should consider the right type of payer/administrator to suit their needs:
- Administrative Services Only (ASO) - Insurance company that offer packaged administrative services to self-funded employers without taking on risk There is often little flexibility to included or exclude specialty vendors to optimize the health plan performance.
- Self Administration - Employers take on the large investment to administer benefits and pay their own claims.
- Third Party Health Plan Administrator - A Third Party Health Plan Administrator offers administrative service packages ranging from complete services to customized services to suit the employer's needs. These services include claims payment, case management, provider networks, prescription coverage, and medical fraud detection.
Employers offering self-funded health plans take advantage of cost savings, increased cash flow, flexible benefit decisions, as well as choice in administration and how to invest their funding; not to mention the cost savings incurred by being exempt from several provisions of health care reform.
PayerFusion is a Health Plan Administrator that offers an extensive array of services that meet self-funded health plan payer needs. These include provider network design/support, policy design, full-service TPA, technology solutions/support and informatics.