What every employer needs to know about group health insurance from the employee benefit specialists at Archer Jordan
Group Health Benefits
The employee benefits landscape is rapidly changing, particularly when it comes to health benefits, the risks and rewards have never been greater. As an employer and plan sponsor it is important for you to have control over how your benefits plan is designed and how money is spent. This starts with knowledge, so in this article we have put together a concise introduction to just a few of the more critical aspects of health insurance every employer should be aware of.
Self-funded health plans vs fully insured plans
From an employer standpoint, most group health insurance plans fall into two broad categories: self-funded (or “self-insured”) plans and fully-insured plans.
Our speciality is self-funded health plans since they provide most employers with greater cost savings, more plan control and better outcomes. With self-funded benefit plans (or “self-insured” plans) Employers pay only for the insurance they use. As claim costs are incurred, the employer pays them directly (typically out of an earmarked trust fund which holds employee and company contributions.)
In contrast, with fully-insured plans, employers pay an insurance company directly for employee coverage and incur the same premium cost regardless of whether employees use the health coverage or not. (Unused spend is simply eaten up by the insurance company as profit) When dealing with the “BUCAH’s” (Blue Cross / Shield, United Healthcare, Cigna, Aetna and Humana) those profits can be massive. When rates go up, you simply have to pay-up or find another plan. While your premiums are consistent over your coverage period, that consistency comes at the cost of lost capital, loss of control over your plan and loss of transparency.
While self-funded plans offer significant advantages over older more traditional models, employers must consider a variety of critical factors in setting one up correctly. These factors include managing federal compliance as well as fiduciary responsibility, managing cost containment and ensuring quality, member centric care.
Fiduciary Responsibility and Federal Compliance
The easiest (and safest) way to take advantage of the benefits of a self-funded plan is to partner with a Third Party Administrator or “TPA” such as Archer Jordan. The TPA’s role is to set-up and administer the plan including claim payments to providers as well as provide full reporting services. Third party administrators remove the administrative burden and responsibility off the employer while also assuming fiduciary responsibility (also referred to as “fiduciary outsourcing”) Here is a concise introduction on fiduciary responsibility as it relates to health plans directly from the U.S. Department of labor:
* “Fiduciaries have important responsibilities and are subject to standards of conduct because they act on behalf of group health plan participants and their beneficiaries. These responsibilities include:
• Acting solely in the interest of plan participants and their beneficiaries and with the exclusive
purpose of providing benefits to them;
• Carrying out their duties prudently;
• Following the plan documents (unless inconsistent with ERISA);
• Holding plan assets (if the plan has any) in trust; and
• Paying only reasonable plan expenses.
A fiduciary who lacks that expertise will want to hire someone with the professional knowledge to carry out those functions.”
Cost Containment Methods
As an additional layer of protection, TPAs often employ stop loss limit insurance. How does stop loss insurance work? The insurance provider becomes liable for any losses/expenses that exceed a certain limit (deductible). There are two forms of stop-loss coverage. Specific stop-loss protects employers from abnormally high claims on individual employees. Aggregate stop-loss protects provides a ceiling on how much the employer is required to pay during a contract period. The safest approach for most employers taking the self funded route is to implement both forms of coverage.
Reference based pricing
With traditional healthcare, reimbursement rates for medical services are based on whatever the provider bills. This can result in extremely high (and often unfair) expenses. Reference Based Pricing (RBP) uses a specific, objective reference point (medicare as well as other benchmark pricing methods) to determine reimbursements. At Archer Jordan, we employ the next evolution of RBP: Value Based Pricing (VBP). This enables us to deliver higher quality care with a more efficient service model all at a lower cost and greater value.
Health Plan Payment Integrity
Healthcare payment integrity protects employers from dollars lost to fraud, abuse, errors or incorrect and wasteful billing practices. It also ensures approved member claims are paid swiftly and accurately. As a Third Party Administrator, Archer Jordan leverages leading edge technology and protocols to thoroughly review all claims and payments. Identifying and mitigating potential problems early helps us resolve claims more efficiently while preserving your savings.
Member Centric Care
What is member centric health care? At Archer Jordan it means all data, processes, logistics, are organized and structured in such a way to deliver the best possible experience for your members. Processes like enrollment, ID cards, provider referrals have all been optimized for efficiency and convenience. This increases member engagement and ensures better health outcomes.
Archer Jordan Group Health Plan Administrators
In our role as health care advisor, we administer plans that minimize your risk, reduce your cost, ensure compliance, lighten your administrative burden and provide exceptional quality, member-centric care to your workforce. We hope this brief introduction to a few important health insurance topics has been helpful and if you have any questions we are here to serve!