To self-insure or not? Why D.C. experts say go for it

Aug 15, 2014, 4:34pm EDT

To self-insure or not? Why D.C. experts say go for it

Illustration for the Washington Business Journal by Michele Melcher

Your guide for what you need to know before Jan. 1, 2015.

Tina Reed

Staff Reporter- Washington Business Journal

Most large employers health plans are already self-funded.

But there may be something to be said for the smaller companies to get into the game, experts told me recently.

I was asking about what steps companies with 100 or more employees should be careful not to forget as they brace for the impact of the 2015 mandates of the Affordable Care Act. And instead, they were telling me about strategy. And you wouldn’t skip strategizing when it comes to any other part of growing your business.

But many employers still treat their health care costs like they’re almost uncontrollable, said Josh Jeffries, a principal at Arkin Youngentob Associates LLC in Bethesda. Instead, they should be eyeing alternatives in how they offer coverage, he said.

For instance, shifting to a self-insured model allows businesses to reduce the overall fixed cost of their insurance plans by instead taking on the variable medical claims that come up for employees (while of course, meeting the minimum essential coverage required by the law.)

That gives your company more opportunities to save money without the risk of huge losses, Jeffries said.

Firms with less than 250 employees all the way down to 10 employees should consider self-funding, said Keith Lemer, President of Bethesda-based WellNet Healthcare Group. “This will help employers to not only take advantage of favorable incentives in ACA to exempt self-insurance from many requirements imposed on insurers, but also to avoid many of the ACA’s costly benefit mandates and requirements,” Lemer said.

For example, where insurance plans must include a package referred to as “essential health benefits,” the rules are relaxed for self-insured plans when it comes to defining coverage for paying for ambulatory patient services, such as doctor’s visits and outpatient services, emergency visits, hospitalization, maternity and newborn care and mental health care and more.

In addition to relaxed rules, self-funding allows more customization to the specific workforce, employer control over the health plan and its services and the freedom to contract with any provider or provider network, Lemer said.

And, he said, they come with a “higher probability of reducing overall employee health benefit expense.”

But doesn’t that open you up to additional risk in the case of an expensive year? (Think: AOL’s “distressed baby” scenario involving one of its employees needing intensive and expensive intervention following a premature delivery).

Having a “stop loss” insurance for your company’s self-insured plan can mitigate that risk, Jeffries said. But at the same time, it stops your company from experiencing the potential 15 to 20 percent increase in premiums following an expensive year.

“You’re in a much better situation in a bad year or a good year,” Jeffries said.

Find that information useful? Check out more recommendations in my front page ‘Survival Guide’ to 2015 for more ideas. Have questions? Let me know and I’ll circle back to our experts with your questions.

Tina Reed covers health care.

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