Self-funded plans are able to realize significant cost savings and develop more flexible health plan designs due to the exemptions they receive from state and federal regulation. However, both PPACA and ERISA both impose a number of key regulations that govern health plan requirements and management.
Healthcare Reform has accelerated the use of different methods to pay for medical services. Although moving away from fee-for-service payment is widely considered to be a step in the right direction, how we pay for services is only half of the challenge. The other half lies in determining the right amount of payment.
Administrative expenses in the US healthcare system are responsible for nearly one-third of all healthcare spending. According to estimates, reducing complexity and standardizing administrative functions could save approximately $26 billion.
When setting health premiums, insurers balance covering their financial risk and administrative overhead with offering competitive rates. Insurance companies consider factors like age, medical history and cost of care to set premiums for the coming year.