Insights from our Recent Self-Funding Health Benefits 101 Webinar
As healthcare costs continue to rise, more employers are exploring self-funding as a strategic alternative to traditional fully insured health plans. In our recent Self-Funding Health Benefits 101 Webinar, team members from BPAS Health Benefits Consulting and OneGroup’s SVP of Employee Benefits discussed the risks and benefits of Self-Funding Health Benefits. They offered valuable insights from their organizations considering the self-funding approach.
Why Self-Funding?
Self-funding allowers employers to pay for healthcare claims directly, rather than paying a fixed premium to an insurance carrier. This model has several advantages:
- Cost savings: Employers can retain savings when actual claims are lower than expected. Over time, this can result in 8-10% savings compared to fully insured plans.
- Flexibility: Self-funded plans are not subject to state mandates, allowing employers to tailor benefits to their workforce. For example, fertility coverage can be customized rather than following state-imposed requirements.
- Transparency and Control: Employers gain access to detailed claims data, allowing for more informed decision-making, improved utilization management, and the development of targeted wellness initiatives.
Understand the Risks
While the benefits are compelling, self-funding also comes with risks that should be considered before making decisions to follow this model:
- Claims Volatility: Monthly costs can fluctuate significantly due to high-cost claims or seasonal trends.
- Administrative Complexity: Employers must manage multiple vendors, including third-party administrators (TPAs), pharmacy benefit managers (PBMs), and stop-loss carriers.
- Compliance Responsibilities: Self-funded employers must navigate additional responsibilities under HIPAA, and many are also subject to ERISA compliance rules.
Mitigating Risk with Stop-Loss Insurance
To manage financial exposure, most self-funded employers purchase stop-loss insurance. This coverage reimburses the employer for claims that exceed a certain threshold, providing a safety net against catastrophic costs.
Transitioning to Self-Funding
A successful transition requires careful planning. Key steps include:
- Engaging Leadership Early: Secure buy-in from finance and HR teams at least a year in advance.
- Vendor Coordination: Notify current carriers of the intent to move to self-funding and begin evaluating TPAs and stop-loss providers.
- Employee Education: Communicate changes clearly to employees, emphasizing what will and won’t change in their experience.
- Compliance Preparation: Draft a Summary Plan Description (SPD) and ensure readiness for federal reporting requirements.
Is Self-Funding Right for You?
The ideal candidate for self-funding typically has 250-500+ full-time benefits eligible employees, but each organization is unique and any employer with more than 100 full-time employees may consider self-funding. BPAS offers a proprietary analytics tool to help employers model potential savings and risks based on their specific demographics and claims history.
Emerging Trends to Watch
Self-funded employers should stay informed about evolving healthcare trends, including:
- Gene Therapies: High-cost treatments with transformative potential.
- GLP-1 Medications: Popular for weight loss but costly and controversial.
- Regulatory Changes: Ongoing updates to federal compliance requirements.
Conclusion
Self Funding isn’t a one-size-fits-all solution, but for many employers, it offers a path to greater control, customization, and cost efficiency. With the right partners and preparation, the transition can be smooth and rewarding. Our OneGroup Employee Benefits and BPAS Health Benefits Consulting teams can help you decide if self-funding health benefits is the best model for your business and guide you in the right direction.
BPAS and OneGroup are subsidiaries of Community Financial System, Inc. (CFSI). As sister companies, BPAS and OneGroup are able to operate as one company working as one team. Leveraging their combined expertise in employee benefits consulting, actuarial services, brokerage, analytics, and HR consulting, BPAS and OneGroup work together to refine and enhance your benefit strategies.
To learn more about OneGroup’s Employee Benefits services, visit our website. To learn more about BPAS’s Health Benefits Consulting services, visit their website.
This content is for informational purposes only and not for the purpose of providing professional, financial, medical or legal advice. You should contact your licensed professional to obtain advice with respect to any particular issue or problem. Please refer to your policy contract for any specific information or questions on applicability of coverage.
Please note coverage can not be bound or a claim reported without written acknowledgment from a OneGroup Representative.