Traditional health insurance is costly. Each year, you wage war against the annual cost increases that eat away at your business’s bottom line. And yet, despite your most valiant efforts, the system always wins.
But there is a way to fight back. Many small and midsize companies have figured out what the big guys have known for decades - you can beat the system. Trailblazing employers with high-performing benefits plans are using self-funding with stop-loss reinsurance protection to take ownership and seize control of their healthcare spend.
Act I: Self-Funding With Stop Loss
Self-Funding with stop-loss reinsurance protection, as part of an overall long-term health care strategy, can save your organization money – even small and mid-sized companies.
There are two options to take ownership of healthcare spend under a self-funded arrangement:
1) A bundled approach, where a single healthcare company provides all administration services and insurance, or
2) An unbundled approach, which allows an employer to contract with specialized companies to manage or provide each portion of their program, separating the different services needed to effectively administer and manage the cost of the plan.
Act II: Pros of a Bundled Approach
A bundled plan gives the appearance of a traditional fully-insured plan and provides the familiar name recognition of the insurance carrier that employees are used to. Carriers such as Anthem, Blue Cross, and United Health Care offer an integrated single vendor (bundled) approach.
Bundled plans keep the control and ownership of the plan components with the insurance company. These components may include: claims administration, stop-loss insurance, pharmacy vendor (PBM), managed care (PPO) network, wellness programs, plan design templates, reporting and data analytics, utilization review, utilization management, and disease management.
Act III: Downfalls of a Bundled Approach
While bundling services through one integrated vendor gives your plan name recognition and is the easiest path, it will not save you or your employees money. This is a misconception perpetuated by your health insurance carrier. Employers with bundled services continue to be frustrated by their lack of control and the lack of transparency in their programs.
Anything potentially gained in the simplification of bundling and carrier name recognition is offset by the lack of customization, flexibility, and nimbleness to address cost drivers. You are stuck with cookie cutter plan designs, a lack of interchangeable parts (e.g. stop loss and PBM), and the insurance carrier's unwillingness to download data for data analytics or risk management integration with outside vendors. You also give up the ability to carve out or directly contract with providers.
Act IV: Pros of an Unbundled Approach
Unbundling encourages competition and reduces cost – you know what you are getting and exactly how much you are paying. You have the ability to select the most competitively priced, best-in-class vendors that meet the specific needs of your plan participants. Unbundling allows employers to choose vendors that are the best fit based on factors such as location, company size, demographics and overall employee risk factors that are unique to your group.
Act V: Downfalls of an Unbundled Approach
Although unbundling is very cost effective, it has a few drawbacks. There is a potential for lack of name recognition for employees and providers, potential for less comprehensive networks with PPO discounts, and potential interface fees charged by TPAs or carriers to work with a stop-loss carrier. Also, taking on the responsibility of building your plan design from the ground up can be complex, and could also include more administrative work.
The Battle Ahead
Not every vendor is going to be great across every type of service or program. Employers that can implement custom programs and services specific to their employees’ needs can gain a significant competitive advantage. Not only are they able to reduce the frequency and severity of their claims, which lowers costs, but it also helps them attract and retain the best employees. Employers that can efficiently tailor programs to provide healthcare services that are necessary and needed by their employees hold a significant business advantage.
Now more than ever, self-funded healthcare plans make financial sense. You can take back control and use data and analytics to fine-tune the free standing components of your plan to implement the specific services and programs that you need, without overpaying.