Healthcare Policy Shakeup

As a business owner, offering a competitive employee benefits package is a key tool in attracting and retaining talent. However, you also have to ensure control over the cost of those benefits without compromising coverage or compliance with existing regulations.

The onging uncertain state of healthcare legislation probably has you asking several questions:

• How will my business be affected?

• How much will my costs change?

• Will I still be able to offer competitive benefits?

• What, if anything, can I do to prepare for future regulatory changes?

The dizzying legislative debate may be difficult to follow, but for business owners, providing comprehensive group health benefits doesn’t have to mean waiting for the next bill to pass, and it doesn’t have to mean providing benefits at the expense of your bottom line.  Self-insured health plans could be the answer.

Self-insuring entails business owners paying for employee claims on a case-by-case basis, rather than paying monthly fixed premiums to an insurance carrier.

What is a Self-Insured Health Plan?

Self-Insured Health Plans are an option growing in popularity with small and midsized companies that enables business owners to take healthcare into their own hands regardless of policy changes. Self-insuring entails business owners paying for employee claims on a case-by-case basis, rather than paying monthly fixed premiums to an insurance carrier. Claims are usually handled by a third-party administrator (TPA), which takes care of claims processing and logistics, as well as customer relations. Most business owners will also supplement the self-funded health plan with medical stop loss insurance to protect the company from any catastrophic claims ensuring the health plan won’t clean out cash reserves.

Organizations of all sizes implement self-insured health plans as a way of limiting overhead and maintaining control over their group medical costs. Self-insured plans are tailored to the particular needs of your workforce, and pay individual claims as they arise, eliminating the inefficiencies of a fully-insured policy that may never get used.

Importantly, self-insured plans are not subject to many of the mandates or taxes at the state level that apply to fully insured group health plans under the Affordable Care Act (ACA), which are preempted by federal regulation. Per the Self-Insurance Institute of America (SIIA,) these federal laws include the Employee Retirement Income Security Act (ERISA), Health Insurance Portability and Accountability Act (HIPAA), Consolidated Omnibus Budget Reconciliation Act (COBRA), the Americans with Disabilities Act (ADA), the Pregnancy Discrimination Act, the Age Discrimination in Employment Act, the Civil Rights Act, and various budget reconciliation acts such as Tax Equity and Fiscal Responsibility Act (TEFRA), Deficit Reduction Act (DEFRA), and Economic Recovery Tax Act (ERTA.)

Self-insured plans simplify an employer’s ability to comply with regulations while offering the flexibility necessary to meet the unique needs of their particular workforce.  According to the Brookings Institute:

• Self-insured plans are not subject to the Essential Health Benefit (EHB) requirements of the ACA, which stipulate minimum coverage for healthcare plans sold by insurers to small firms with 50 to 100 FTEs. Such minimum coverage includes maternity care, mental health and preventative services.

• Self-insured plans are not subject to the community rating requirements that ACA applies to small firms with 50 to 100 FTEs.  These requirements restrict how much insurers may use health factors like age and smoking status within a firm’s population to vary the total premiums charged to the firm.

• Self-insured plans are not subject to medical loss ratio requirements, which apply to policies issued by traditional healthcare insurers. These requirements mandate that at least 80 percent of premiums received by the insurer be spent on healthcare activities, as distinct from administrative functions.

• Self-insured plans escape the health insurance tax mandated by the ACA on most healthcare premiums paid to traditional health insurers.

• Self-insured plans also escape the state taxes on healthcare premiums paid to traditional health insurers.

The ability to avoid state-by-state mandates and taxes is an additional cost savings benefit of self-insured plans.  States can charge up to 5.5 percent of premiums in taxes, the average being between 2-3 percent of the premium's dollar value. This cost savings, plus the flexibility in choosing coverage options, makes self-insured a particularly attractive option for businesses that operate in multiple states but want to offer employees consistent benefits regardless of their geographical locations.

Self-insuring is no longer an option reserved solely for large companies or those with an existing cash reserve; in fact, it has become an extremely popular option for small and mid-size businesses. These are the organizations with the most at stake when it comes to healthcare costs and being at the mercy of changes in legislation. So why not take control of that aspect of your business now, and ensure reliable coverage at stable costs, no matter how things shake out in Washington?

Have questions about whether self-insured plans are right for your organization – or just questions about self-insured plans in general? Contact us today for a free, no-obligation consultation. We’re happy to answer your questions.