Can “Limited Funding” reduce your health insurance costs?
With the ever-increasing cost of health insurance, carriers are offering new products to help lower the cost of healthcare for qualifying businesses. Most companies today use a fully insured medical plan with limited plan design choices. What that means is you pay a set premium each month and the insurance company takes the risk in high claims years or realizes the reward when claims are much less than the premiums paid. Because you have very limited access to actual claims data you never know if they are making or losing money on your group, you just know it’s expensive.
Carriers have offered “self-funded” insurance plans for larger companies for many years. With the ACA and all the rules and regulations that came with it the carriers realized that by using a self-insured plan they had plan design flexibility and a lower tax burden. The next step was to see if there was a way to make these plans work for smaller employers, especially those with healthy employees. The good news is, there is a way and today many carriers are offering limited funded medical plans to companies with as few as 10 enrolled employees.
These new plans offer a high level of protection from large claims and the employer is never asked to pay more than their regular premiums each month. In the event they have a bad claims year with one or more very large claims, the maximum risk the employer faces is the amount of their agreed upon premiums. The flip side of that is if claims come in less than expected the group can get part of that savings back. The other advantage for smaller companies (under 50 employees) is the plan design flexibility “limited funding” provides.
These plans don’t work for all companies, in fact we are only seeing success in about 20% of the groups we are quoting. Only those companies with lower medical risk are a good fit for these plans. There is an underwriting process to determine the health and possible future risk of each group. This can be as simple as using Milliman to get pharmacy data and then making a determination from that. The other way is getting each employee to complete a health statement listing their medical conditions and any prescriptions they are taking. This is of course much more accurate but also much more difficult for the employer and HR department.
An example of the savings looks like this. We have a medical practice with 31 employees who had a small group EHB plan with BlueCross BlueShield of TN. The employee rate for their lowest cost plan was $402 using the S Network, the P network cost $461. We went shopping carriers and looking at all the different options. The group moved to Humana with a “limited funding” plan that includes all the hospitals in network just like the P Network for a $307 employee premium. We also offer two other buy-up options each of which were much less expensive. This of course saved the company a lot of money, we were also able to decrease employee costs and were able to give them a wider variety of plan design options.
Will this work for your company? Good question, the only way to find out is to go shopping. You don’t need to wait for the renewal, especially if it’s January 1st. If you find a better program you can change at any time, the carriers lock your rates in for 12 months but you can leave sooner if that is best for your situation. You can reach us at 615-724-1701 or firstname.lastname@example.org
Posted on 04/16/2019 12:48 PM by David Moore
Federal Court Unravels Association Health Plans
The Trump Administration has been proposing new ways to reduce group medical insurance and healthcare costs and the resistance continues to mount. Two of his lower cost models are short-term medical policies and Association Health Plans. Both are coming under much scrutiny and on March 28, 2019 a federal judge ruled that parts of the 2018 final rules on association health plans (AHP's) are invalid.
The court struck down two parts of the rule:
- The provision defining "employer" to include associations of disparate employers; and
- The provision expanding membership in these associations to include working owners without employees.
The fact that AHP's were intended to allow small businesses and individuals to avoid the requirements of ACA and allowing an individual to be considered an "employer" and an "employee" at the same time is just not viable. The court ruled that bona fie association and working owner provisions of the final rule were unreasonable interpretations of ERISA and must be vacated.
In Tennessee there are several groups working hard to design and implement AHP's. I expect we will see changes in the structure of Association Health Plans to exclude one person groups and require common industries to band together. We are far from done with the tinkering to healthcare while costs continue to rise.
Have you considered Local Funding for your group insurance plan? We have helped many TN companies reduce their costs by using non-traditional techniques and getting outside to box to build better plans for lower costs.
Read more here
Posted on 04/03/2019 11:20 AM by David Moore