What is the difference between fully funded, self-funded and partially funded?
Fully funded plans are those that are offered for sale by an insurance carrier, who assumes all of the risks and pays all of the claims.
Self-funded plans are those wherein an employer assumes all insurable risk and pays claims (through a third party administrator). Totally self-insured plans are rare because of the risk of catastrophic claims.
What is common, and becoming more accessible for smaller employers, is partial self-funding. Partial funding uses an insurance carrier to limit the employer’s overall risk as well as limiting the risk on individual catastrophic claims. This is referred to as a stop loss.
Partially self-funded plans give employers control and flexibility that a fully insured plan cannot.
When should a company look into transitioning from fully funded to partially funded?
The general rule used to be after a Company has surpassed 200-250 employees participating in the Company health plan. But this rule has been rapidly changing, with companies as small as 100 employees transitioning to partially funded plans.
Why the change?
The Affordable Care Act. Also, there are newer, extremely competitive partial self-funding options from insurance carriers and third party administrators.
So your still work with an insurance carrier when partially self-funding?
YES! And a TPA that handles claims.
How does the Affordable Care Act (ACA) impact the decision to move to partially funded plans?
While many of the ACA’s reforms affect self-funded plans, self-funded plans do escape some of the market reforms. This includes: the essential health benefits package, medical loss ratio rules, review of premium increases, annual insurance fee, methods to allocate insurance risk, guaranteed issue and renewability, insurance premium restrictions, and annual deductible limits. Self-insured plans may also be excluded from reinsurance fees.
What is the biggest obstacle for becoming partially funded?
The biggest obstacle is limited or no access to claims data. Employers that have fully insured plans typically do not have access to the claims submitted on their existing plan. A good broker has strategies for this limitation, as well as a plan for analyzing claims in the first years of self-funding.
What is a realistic transition time to go from fully to partially or fully self-funded?
3 to 5 years.
What are strategies for autism and self-funded plans?
There is nothing worse for an HR department and upper management than having a key employee try to pay for his child’s therapy only to find that it is no longer covered. Sometimes, we rectify this by making sure that therapies for autism are included in the self-funded plan from day 1. This makes sense if an employer knows employees are struggling with autism.
Conversely, if the employer has no indications, and wishes to wait on any additions to the self-funding until he has more claims data, we start with a great employee education program about the transition in benefits and provide resources for any employees that would be better served with an individual or child only plan. Post ACA, children cannot be denied based on a pre-existing condition, we simply coordinate the purchase of an individual plan with the individual open enrollment period. Our individual team does an excellent job of helping employees with this. An employer does not want to send any employee out on his own to navigate a very confusing and daunting individual health insurance post Covered CA.
