Are you ready for self-funding?

First things first: What's the difference between being fully insured or self-funded?

A fully insured employer pays a predictable (and easy-to-budget) fixed premium every month, established at the beginning of the contract period. A self-funded employer pays claims as they are incurred, which likely means variability from month to month, on top of fixed administrative costs.

With self-funding, you directly fund the claims of your own group and only pay for the health care services actually used by your employees and their families. Fully insured premiums, however, are the same per employee regardless of services used.

Is my business ready to make the leap to self-funding?

Before considering a self-funded health insurance plan, your business should have a strong balance sheet, steady cash flow to fund claims, a stable number of employees (Wellmark Blue Cross and Blue Shield requires at least 25), and a desire to actively manage your health plan.

Check, check, check, and check.

OK. Now, you may want to look beyond the finances to make sure your business and your HR staff are ready to take the leap. Answer the true or false statements below and see where you end up.

1. I'm ready to manage our health insurance plan from top to bottom. Self-funding gives you the opportunity to fine-tune copay amounts, benefit designs, and customize well-being programming to fit your unique workforce and worksite.
2. Our staff is ready to take on administrative compliance with applicable regulations. Though compliance is likely nothing new for your business, it does take on a different form with self-funding. Like how you handle personal health information (PHI) to what you report to the government (ERISA External Site), for example.
3. I want more access to claims data and utilization information. Self-funded plans own their claims and utilization data. Note: You won't be able to access individual, personally identifiable claims data, but you will see it in aggregate and can analyze from there.
4. I understand the impact high-cost claimants may have on our budget. Even though high-cost claimants, or those whose claims cost $50,000 or more per year, make up a small percentage of members, they are largest driver of health care expenses.
5. I have a longer-term view of health insurance costs and improving the health of my employees. Self-funding likely won't provide huge savings in the first year or even year five. But with smart management, you'll be able to use claims and utilization data to fine-tune your benefits and well-being programs to the needs of your workforce.

If you answered mostly "true," your business may be ready for self-funding.

Don't forget about stop-loss coverage

Self-funding may seem intimidating, but carriers do offer protection for your business against higher-than-expected claims. Stop-loss insurance covers expenses for the contract period that exceed pre-determined levels, known as stop-loss deductibles. There are two types of stop loss policies:

• Individual stop-loss insurance protects you from higher than expected claims by your individual employees.
• Aggregate stop-loss insurance protects you from higher than expected claims by your entire member population.

Stop-loss becomes part of the fixed costs of self-funding, along with administrative fees. That's why truly understanding contract provisions is vital to making informed decisions.

Pulling it all together

After this quick check-in, you may find that your business isn't quite ready for self-funding or maybe this year isn't the year to start. But if you do think the time is right and want to learn more about making the switch, reach out to your authorized Wellmark representative or email us at blueatwork@wellmark.com Send Email.

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