With the costs of insurance skyrocketing in America, the majority of the focus lies on fully insured health plans. These are the typical plans handled by Blue Cross/Blue Shield, Aetna, Fortis, Kaiser, HealthNet, and various others. While these plans and companies certainly have their place (particularly for smaller companies) there is another option for companies who desire to take better control of their healthcare costs without dropping benefits, cost-shifting, or raising premiums – self-insurance.
Though there are many factors, the basis of a self-insured plan is that the plan itself assumes all of the risk. Often, a third party administrator (“TPA”) is secured to handle claim processing and customer service, and a reinsurance or stop-loss carrier or obtained to help avoid catastrophic losses to the plan. Additionally, agreements are drawn with a selected network of physicians on either a direct contract or percentage-off-of-billed-charges basis. If the plan/employer is working with an experienced TPA, specific factors and claims data is gathered to determine how much should be charged in premiums in order to cover plan costs and build a reserve for larger claims.
One of the biggest benefits to self-insurance is that the reserve funds belong to the plan – not an insurance company. The plan participants have a vested interest in the benefits offered and the premiums charged, and the plan has a vested interest in educating their participants and ensuring that they are doing all they can to maintain good health. Healthier employees results in fewer claim dollars spent and, ultimately, higher reserves, the addition of benefits, lowering of deductibles, and the regulation of plan premiums.