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Self Funding Deemed an Effective Alternative for Smaller Employers to Fund Their Health Benefits

57% of All Health Plans in the U.S. are Self-Funded

"Today, with the passing of the Patient Protection and Affordable Care Act (PPACA), the interest in this financial arrangement has never been higher. It's estimated that 57% of all health plans in the U.S. are self-funded, covering more than 100 million Americans. That's up from 44% in 1994, an increase of nearly 30% in 10 years. With the oncoming regulations associated with health care reform (PPACA), more employers are looking to self-fund their benefit plan as a way to regain control of their health care investment".

17.5% of Employers under 200 Lives are Self-Funded

An example is a recent study done by United Benefit Advisors, a large group of benefit advisory firms across the US. The study indicated 17.5% of employers fewer than 200 was self-funded with another 12% of employers in the small group market were considering it.

HHS Gives Self-Funding "Stamp of Approval"

Because of PPACA, the Department of Health and Human Services (HHS) recently examined the self-funded marketplace and their report, in essence, gave the "stamp of approval" (SIIA COO, Mike Ferguson, MyHealthGuide.com 3/31/2011) to self-funding. There were several concerns the HHS reviewed, including disparities between self funding and fully insured plans. All of the misconceptions addressed were resolved.

DOL Confirms Staggering Savings under Self-Funding

Deloitte Advanced Analytical Consulting Group was quoted in a recent Department of Labor (DOL) report that fully insured premiums increased by $808 while self-funding only increased by $248, a difference of 226%!

On the Flip Side...

AMA Says Competition Lacking for Many Fully Insured Markets

A recent study by the American Medical Association says the vast majority of commercial health insurance markets (for fully insured plans) in the United States are dominated by one or two health insureres. That in 48% of metropolitan statistical areas, at least one insurer has a market share of 50 percent or more.

US Goverment Investigating Fully Insured Antitrust Practices

The U.S. Goverment is investigating antitrust practices in health insurance. The Justice Department's lawsuit against Blue Cross Blue Shield of Michigan challenges provisions of the health insurance carrier's agreements with hospitals. The provisions, referred to as "most favored nation" clauses, essentially guarantee that no other insurance plan can obtain a better rate, according to the Justice Department. The department said that these agreements likely resulted in Michigan consumers' paying higher prices for their health care services and health insurance.

PPACA May Create Greater Inequities for Small Employers

Under health reform, insurers choosing to participate in regulated exchanges will be required to adhere to stringent community rating underwriting practices that will limit their ability to distinguish and price between employers representing better risks and those representing poorer health risk. An employer who commits to driving healthier lifestyles among employees and generates lower claims experience will be subjected to the same narrow underwriting criteria as an employer with a less healthy workforce. This inability for insurers to properly reward employers for driving consumer engagement and health management among employees will drive many smaller employers to weigh the limited benefit of engaging their employees in wellness versus the disruption of employer sponsored health improvement.

Is it time for employers to re-examine how they are managing their health care benefits investment?

Self-funding is a viable option for the smaller employer. Talk to an ECU partner TPA or contact us. We'll be glad to help and refer you to one of our TPA's.

101 N. Pine Street, Suite 210
Spartanburg SC 29302
Phone: (864) 542-1565

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