How to Find the Best Fit for Your Company
A fully insured health plan can work. However, most company leaders and financial executives know it comes with pain: You’re stuck in a cycle of paying for last year’s claims with current premiums; there’s no actionable data; plan design flexibility is limited and changing carriers to save money causes disruption and dissatisfaction for employees.
Fully insured health plans can be frustrating, but they’re not your only option. Katz/Pierz is experienced in implementing alternative financing solutions that won’t sacrifice employee morale – and take care of your bottom line.
The Health Insurance Plan Financing Spectrum
Moving to an alternative financing solution means assuming more risk as an employer. Katz/Pierz understands the pros and cons of each alternative funding option and can help you pick the best option for your business.
The fully insured model is a good option for an employer that wants ease of use, no risk, carrier name recognition, and predictable cost.
Fully Insured
Employer as funds facilitator
- Employer pays fixed monthly premium
- Carrier assumes risk
- Carrier retains 100% of profit if claims are lower than premium
- Little or no data transparency
- Surprise renewals
- Carrier designs plans
- State mandates
- State premium taxes
- Renewals in mid to large market aim to recoup high claims paid in prior year
- “Fuzzy math” is used to justify volatile renewals
- Rates in small market are group claim-neutral and must be approved by state
A level-funded carrier-based program is good for an employer that wants predictable cost and cash flow, more data than fully insured, carrier name recognition and wants to participate in claim surplus. Depending upon your state, these plans can be available to employers with as few as two enrolled employees.
Carrier-Based “Bundled” Level-Funding
Employer as plan selector and designer
- Employer pays fixed monthly cost
- Some profit (claim fund surplus) returned to employer in a good year
- Must renew to get surplus
- Avoids state mandates
- Lower premium taxes than fully insured
- Carrier owns / controls all plan elements
- Stop-loss / provider network proprietary to carrier
- Can’t market stop-loss insurance without changing carriers / plans / networks
- Carrier determines plan designs
- More data transparency than fully insured
- Employer risk is transparent and capped
- Little or no risk-pooling = volatile renewals
A level-funded consortium program is good for an employer that wants predictable cost and cash flow, more data, control over plan design details, lower internal expense charges than the carrier model, 100% ownership of claim surplus and a longer-term solution due to lower renewal volatility than the carrier model. Depending upon your state, these programs are available with as few as 20 enrolled.
Unbundled Level-Funding with Consortium
Employer as payor and plan sponsor
- Employer pays fixed monthly cost
- 100% profit (claim fund surplus) returned to employer
- No renewal requirement to get surplus
- Avoids state mandates
- Lower premium taxes
- Elements of plan are “unbundled” producing lower expense charges than carrier model
- Stop-loss is risk-pooled with consortium = significant leverage + less renewal volatility
- Employer selects provider network and designs plan
- Employer can participate in Rx rebates
- Full data / utilization transparency
- Employer risk is transparent and capped
- Cost-containment has impact
The pay-as-you-go captive model is good for a small (50+) to mid-size employer that wants full plan control, contractual caps on cost, and the long-term cost benefits that come with self-funding without the risk associated with self-funding on a standalone basis.
Self-Funding Pay-As-You-Go: Captive Model
Employer as payor and plan sponsor
- Employer pays monthly fixed cost (administrative fees + stop-loss premium)
- Employer pays monthly claims
- Employer holds claim fund dollars until needed
- Avoids state mandates
- Lower premium taxes
- Elements of plan are “unbundled”
- Stop-loss is risk-pooled with captive = significant leverage + less renewal volatility
- Employer selects provider network and designs plan
- Employer can participate in Rx rebates
- Full data / utilization transparency
- Employer risk is transparent and capped
- Cost-containment has impact
The pay-as-you go standalone model is good for a mid-size (300+) or large employer that wants full plan control, contractual caps on cost and long-term cost benefits that come with self-funding and is able to withstand the volatility and risk associated with self-funding on a standalone basis.
Self-Funding Pay-As-You-Go: Standalone Model
Employer as payor and plan sponsor
- Employer pays monthly fixed cost (administrative fees + stop-loss premium)
- Employer pays claims monthly
- Employer holds claim fund dollars until needed
- Avoids state mandates
- Lower premium taxes
- Elements of plan are “unbundled” = lower expense charges than carrier model
- Stop-loss is purchased on standalone basis –
- no risk-pooling protection
- potential for volatile renewals and lasers
- Stop-loss can be marketed annually
- Employer selects provider network and designs plan
- Employer can participate in Rx rebates
- Full data / utilization transparency
- Employer risk is transparent and capped
- Cost-containment has impact
What is the best way to fund your health insurance benefit plan?
Why are 64% of employees in a self-funded health plan?
Because self-funding with stop-loss provides the plan sponsor with:
- Greater flexibility and control
- Financial advantages
- True data transparency
- Reporting and analytics
- Protection from high costs
