The founding members of this Self-Insurance.Expert website seek to provide employers a resource for advanced information on what is available in the area of partial or total self insurance of medical, dental, and vision insurance. This site is backed by some of the most widely respected self-insurance experts in the employee benefits industry, and it exists to raise the bar on what is provided to employers, from those that are just exploring the feasibility of self-funding to those that have been self-funded for years but wonder if they are getting all that they should be getting from the latest in market innovations and research.
We know that providing healthcare to employees is not just an important responsibility for employers, it is also a major financial commitment.
Whether the commitment to provide health insurance to employees is an “expense” or an “investment” will depend on how the employer approaches its plan.
This site exists to be a resource for those firms that are seeking to either consider self insurance for the first time or just improve the self-funded plans that they have now. While this site is not a broker|consultant itself, it is backed by some of the most knowledgeable consulting firms in the industry. Those firms will be happy to expand upon what appears in this site. That can include full administrative services only (ASO) or third party administrator (TPA) self insurance and “level funding” plans compared to existing or proposed fully insured plans.
We live in a world of Big Data and sophisticated technology and analytics. The Kaiser Health system generates 1-2 terrabytes of new health data per day. That is equivalent to 200-400 million pages of typed text of new data each day. IBM Watson, the super computer that beat record Jeopardy! contestant, Ken Jennings, has been “sent” to a medical university to “learn” medicine. The convergence of super-computing analytical techniques and artificial intelligence with the avalanche of new data produced each day promises even more changes in the future. We take it for granted that GPS technology can know where we are virtually anywhere in the world. On Google we can search millions of websites in milliseconds, obtaining data that hitherto would have been completely unobtainable. What promise will the revolution in wearable devices have on wellness and healthcare in the future? What such devices provide ten years from now might be transformational.
All of this breath-taking technology exists all around us, and yet what we offer today to employees for health insurance, with the possible exception of consumer driven plans, has all too often been little changed from what was available 20-30 years ago. Reports of the inefficiency and fragmentation of the American healthcare system are too numerous to bother citing. It is estimated that 30% of the dollars spent on healthcare in this country are due to waste, fraud or unneeded bureaucracy; beyond that they are often even destructive. The Affordable Care Act made many changes to the American healthcare system, but it only touched the edges of initiatives to lower costs and in fact its new taxes actually gave a boost to looking at self-insurance. The now traditional template of HMO|PPO|HSA plans is slowing giving way to modifications through telemedicine, ACOs, Value Based Benefit Designs, Referenced Based Pricing, and so forth. Some employees choose to bypass the traditional marketplace in favor of concierge medicine or alternative medicine. And yet, for many employers the difference between a renewal report today from a broker and one 25 years ago is all too often just that the proposal today has more color and the rates are dramatically higher.
We think there is a better way—at least for the right employers. But first we need to explain what we call the Healthcare Risk Continuum. We live in a world of risk, and sophisticated tools exist to analyze and quantify that risk. Once analyzed, off-the-shelf standard products exist to insure that risk—but a whole universe of options exist for those employers that wish to be more engaged in this major part of their budget and take on more risk using sophisticated tools. These employers enter a world of big data, flexibility, empowerment, creativity, risk, and reward.
The Healthcare Risk Continuum starts on the left with traditional fully insured plans in which the health plan takes all of the risk in return for a monthly premium check. From there we move to “level funding” plans that have components of self-insurance—the plan sponsor generally pays a fixed amount similar to a fully insured plan but if there is good claims experience some of the premium dollars will revert back to the plan sponsor. Other type contracts, such as minimum premium plans, “spaggregate” contracts and the like, accomplish the same thing. Farther to the right we have partially self-funded plans where an administrator (insurance company or third party) adjudicates the claims but the plan sponsor takes on a considerable amount of risk per covered member by essentially purchasing a very high deductible (called an Individual Stop-Loss contract) that depending on the size of the covered employee population might be hundreds of thousands of dollars. Because the risk per person is so high, the plan sponsor often purchases aggregate stop-loss protection to limit the amount of financial exposure that the plan sponsor has. Even farther to the right are those plan sponsors large enough to fully self-insure the employee population without any stop-loss protection. The focus here will be on the third option for plan sponsors that elect to purchase stop-loss insurance.
The Healthcare Risk Continuum is not just a matter of risk funding. It is estimated that a full 75% of healthcare costs are due to conditions that are ultimately lifestyle or behavior based—what employees eat and drink, how much or how little exercise they get, the amount of sleep they get, etc. Fitness guru Jack LaLanne gave an interview at age 95 selling his new fitness book (see the interview on YouTube); he was an excellent example of how extreme fitness training is able to not only increase longevity but also dramatically reduce healthcare costs. While we will not be successful getting our employees to all live like Jack LaLanne, such statistics show the staggering amount of room there is for improvement.
The means for determining whether an employer is right for partial self-insurance is a multi-step process. Simple questions about risk tolerance and financial stability are a good place to start, but the question also relates to the size of the insured population, the demographics and known medical histories of the employees (if any such information is known). Once it is determined that there is sufficient interest to proceed, a “Feasibility Study” is produced that not only outlines the pros and cons of partial self-insurance but also provides sample administrative costs, stop-loss premiums specific to the group, and a range of estimated claims costs based on sophisticated actuarial programs tied to data from millions of lives. Thus it is possible to predict the average medical claims for a given employee population, and only for the claims below the selected high deductible. That even includes the actuarial difference between medical costs for employees versus dependents and it also includes how claims experience differs between certain industries. By focusing on the actuarially-derived costs from the local health plans, based on their own claims experience and different provider contracts, such estimates should be more reliable than the claims estimates available from national vendors that sometimes use old and narrow data.
Why use our experts? While the potential rewards of a well-designed partially self-funded plan are many, and the plan if designed and supported properly can truly be transformative, the complexity of such plans can be significant, and there are risks that might be missed and not accounted for by those firms that do not devote the time and resources to become an expert. Beyond the question of risk, the world of self-insurance is rapidly changing, with new options for reducing cost and adding value appearing all the time, such as sophisticated versions of Referenced Based Pricing, “medibid” options, medical tourism within the United States as well as abroad, provider quality ratings at last being available, narrow networks, onsite clinics, etc. We believe that this field is too complex to be left to those that are not committed to being on its cutting-edge.