FAQ Categories
General Questions
What is a self-funded health plan?
A self-funded health plan is a health insurance plan that is owned and operated by an employer to deliver healthcare benefits to their employees and their families. Made possible through the federal ERISA law, this approach to healthcare benefits for employers enables them to gain more control of their healthcare benefits over traditional insurance coverage, and when done right, at a lower cost.
I thought self-funding was only for large employers?
Myth. 60% of employers, regardless of size, are self-funded. Typically, employers from 75 employees and up can easily enjoy the benefits of self-funding.
Isn’t self-funding complicated?
Myth (ish). The level of complexity depends on your approach. The a-la-cart multi-vendor approach to self-funding can become very complicated, chaotic, and create uncertainty. This is why we created a solution that is integrated, comprehensive, and full-service. We wanted to make employer self-funding simple.
Isn’t there significant cost volatility with self-funding?
It depends. Traditional self-funded employer health plans can result in volatile month-to-month costs, which are based on the amount of your employees’ healthcare claims. However, we have created a plan design option to ensure a fixed, stable monthly cost per plan member, which also makes it easier to budget.
Aren't employer costs unpredictable under a self-funded health plan?
False. This is not true at all. Total costs related to a self-funded health plan are made up of a few simple categories: payments for stop-loss / re-insurance, an administrative fee, and a budgeted amount for medical claims. A customizable self-funded health plan can be designed to meet your unique budgetary needs and cap your overall financial exposure to eliminate unpredictability.
I have a distributed work force, and I thought having multiple traditional health plans in each state is my best option?
Self-funding is actually MUCH BETTER in this scenario. Since self-funded health plans are regulated at the federal (not state) level through the federal ERISA law, multi-state coverage is much easier and practical. This means that you can operate ONE self-funded health plan that covers ALL your employees and families, regardless of where they live.
Doesn’t self-funded only really deliver negligible savings over a fully funded plan?
Most employers that switch from a fully funded plan to a self-funded plan, when structured appropriately, appreciate at least a 20% - 30% cost savings annually. Significant savings usually kicks in after the first self-funded plan year, once your self-funded program begins to normalize and accumulate actionable data insights.
It seems like a lot of work.
There’s no doubt that history has conditioned you to dread health insurance renewal time. In the past, changing to a totally new option has made that process even more painful. Our Simply Smart Health Plans were designed to make this process easy and painless. We do all the lifting so that upgrading to one of our plans is seamless and stress free.
Financial Risk
I heard self-funding is financially risky?
Myth (ish). A self-funded health plan that is NOT adequately structured and designed, could impose unnecessary financial risk. It is important to make sure that your self-funded plan includes all the key elements to reduce financial exposure through pro-active member management with cost containment, and adequate stop-loss / re-insurance coverage. With all the right pieces being in place, your financial risk can be mitigated and capped at a level that is comfortable to you.
Without having thousands of employees, isn’t my risk greater?
From a pure actuarial standpoint, there is something to be said for larger risk pools. Spreading the risk across a larger number of participants, usually results in less volatility and exposure. This factor can often be a deterrent that prevents small to medium size employers from exploring self-funding. There are certain plan structures that can establish a broader risk pool of employers, that deliver benefits similar to those appreciated by larger employers. We integrate these structures into our plans.
Couldn’t unknown underlying risk (i.e. a few sick employees) lead to higher stop-loss / re-insurance premiums later on?
Yes, with a poorly designed self-funded health plan. However, we have created a structure that can eliminate volatility by pooling risk between employers and other plan designs. This risk pooling also serves to distribute costs more broadly and enables us to acquire stop-loss at a lower and much more consistent rate.
What if I have several high-cost members; shouldn’t I just let an insurance carrier take on that risk?
If an insurance carrier is taking on risk, they are factoring that into your premiums and also adding their profit. They are skilled at making sure that their risk is rewarded. You can achieve the same level of risk protection through an adequately structured stop-loss policy, and save the funds that otherwise would have been the carrier’s profit.
Carrier Admin Services
The insurance carrier feels like a “safe option” to me. Why wouldn’t I just stick with the status quo?
You can absolutely stick with the insurance carrier under a fully funded plan, or use the carrier to administer your self-funded plan. CEOs and CFOs who have finally decided that enough-is-enough in relation to their company’s skyrocketing healthcare costs, are the employers that will extract the most value out of a self-funded plan that is NOT administered by an insurance carrier. This is probably because they have made a definitive commitment to address this problem. These are the executives that we enjoy working with.
By working with the insurance carrier and leasing their network, I can get the best rates with providers.
This is one of the BIGGEST misconceptions in the industry. Insurance companies do leverage their membership numbers to strong-arm providers into accepting lower contract rates, but they DO NOT pass those specific rates through to the employers who lease their networks. We use a software solution that removes any third-party (including us) from being a middleman in the relationship between you and your providers. It establishes direct contracts between doctors, hospitals and employers, and eliminates the need to lease an insurance carrier’s network.
Doesn’t leasing an insurance carrier network help me avoid balance billing issues?
Typically. But that’s not the only way to avoid balance billing. One of the key differentiators of our health plans is the use of advanced technology for direct contracting with healthcare providers. By having an established contract in place, prior to the delivery of care to plan members, we are able to contractually eliminate balanced billing. Our emphasis on direct contracting creates a better alternative to network leasing by not only addressing balanced billing, but also by lowering costs.
Doesn’t leasing an insurance carrier network help me avoid surprise medical billing issues?
No. Not all providers that deliver services on an exclusive basis within the hospital are contracted with every insurance carrier. Specialties such as anesthesia, emergency medicine, radiology, pathology, and hospitalists typically have exclusive contracts within hospitals, and sometimes they are NOT contracted with all insurance carriers. This means that when one of your employees is admitted to an “in network” hospital, they will often receive a surprise bill from these specialties. Our health plans are built through collaboration with hospitals and doctors to create a community of care. Through our platform, the hospital is required to ensure that these specialties that operate in their facility are contracted in advance. This avoids surprise billing.
What if I have several high-cost members; shouldn’t I just let an insurance carrier take on that risk?
If an insurance carrier is taking on risk, they are factoring that into your premiums and also adding their profit. They are skilled at making sure that their risk is rewarded. You can achieve the same level of risk protection through an adequately structured stop-loss policy, and save the funds that otherwise would have been the carrier’s profit.