With time running out on an opportunity for Congress to repeal and replace the Affordable Care Act and open enrollment season approaching, thousands of small and mid-sized businesses are likely bracing for another round of premium increases. A growing number of employers, however, will choose to avoid the uncertainty plaguing traditional group insurance markets by moving to a self-funded health plan – an option that provides an opportunity for savings and far more plan design flexibility.
Healthcare benefits continue to be perhaps the biggest obstacle facing small and mid-sized businesses. The Self Insurance Institute of America reports that between 2011 and 2016, the average annual deductible for employer-sponsored plans increased by 49% and the percentage of firms with fewer than 200 employees still providing health benefits fell from 68% in 2010 to 55% in 2016.
Self-funding on the other hand, has proven to be a far more responsible alternative for employers, enabling thousands to not only use their health benefit plan to attract and retain high quality employees, but to do so at an affordable cost. While self-funding has long been a staple for the nation’s largest employers, nearly a third of companies with 200 or more employees now offer at least one self-funded option.
Everyone Benefits from Flexibility
There are many reasons for the growth of self-funding, with flexibility and access to valuable claims data high on the list. Since self-funded plans are governed by ERISA, they avoid many of the costly mandates governing fully insured plans. To manage risk, stop loss coverage is obtained to cover claims that exceed anticipated levels. If claims are below anticipated levels, the plan retains the savings that would have been paid to an insurance carrier in the form of non-refundable premiums. Benefits can be customized to meet the unique needs of the group. When an independent TPA is engaged to administer the plan, claims data can be analyzed to identify chronic conditions and other key cost drivers. Services such as telemedicine and mobile transparency tools can be added to make physician access more convenient and more affordable. From plan design to data analysis, everyone benefits from the flexibility that a self-funded plan can provide. It’s the biggest reason why more small and mid-sized companies continue to move to self-funding with help from an independent TPA.
According to Deloitte Consulting LLP, small and medium sized employers with 100 or more workers are contributing considerably more towards the cost of employee and dependent healthcare benefits than legally required – about 73% of the total cost, on average. Regional differences also exist, with companies in the Northeast contributing more toward the cost of family coverage and companies on the West coast contributing more to individual coverage.
Even as healthcare costs continue to increase, consultants agree that employers of all sizes will continue to contribute significantly to healthcare benefits as the job market continues to tighten and retaining top talent remains a top priority.
40 Square Cooperative Solutions, a health care cooperative formed to help Minnesota agricultural producers and their employees obtain affordable health care coverage, officially began open enrollment on November 1st.
40 Square contracted EBSO to design and administer new self-funded health plans. With the cost of health insurance continuing to skyrocket throughout the U.S., forming a health care cooperative has been on the minds of Minnesota farm families for many years.
During the 2017 legislative session, the Legislature and Governor Mark Dayton approved a law that enabled farmers, in Minnesota, to form health care cooperatives to provide a LONG TERM SUSTAINABLE HEALTH PLAN option for farmers. The rule paved the way for 40 Square Cooperative Solutions to begin offering a self-funded health plan to Minnesota farmers.
Farmers who are considered an ‘employer’ with at least one common law employee and work in production agriculture in MN are eligible. Once part of the co-op, employees can register for 40 Square Consortium self-funded health plan. Those interested will work with a broker to make sure the best individual or family plan is chosen.
EBSO, who is based in St. Paul, MN, is proud to have been contracted as the third party administration (TPA) firm to design and administer the new self-funded health plans.
“Flexibility and cost control have long been advantages of self-funded group health plans and the 40 Square Cooperative plan is no exception,” stated Terri Moxley, Senior Sales Specialist with EBSO. “To meet the specific needs of Cooperative members and their families, six different plan designs will be available when open enrollment begins on November 1, 2017,” Moxley added.
For more on the member-owned health care cooperative, visit www.40square.coop online, call 800.643.5822 or speak with your insurance agent.
Mention healthcare startup and you probably think of Silicon Valley. Surprisingly, there’s plenty of healthcare technology happening in the Midwest, with Minnesota leading the way. According to Twin Cities magazine, 98 health technology startups raised more than $420 million in capital in 2016 alone, bringing the total to $2.75 billion since 2009. From mobile app developers to medical device manufacturers, more than 430,000 Minnesotans are employed by healthcare-related companies.
Health savings accounts are hot, with nearly two-thirds of respondents to a Plan Sponsor Council of America survey saying they believe that even those without a high deductible health plan should qualify. A benefit often cited by employers and employees alike is that HSAs can be a valuable part of one’s retirement strategy, since healthcare expenses are viewed as one of the largest people face in retirement.
All the talk about repeal and replace seems to have lulled many plan sponsors into a false sense of security, thinking that ACA regulations weren’t going to be enforced. Unfortunately, the IRS is preparing to begin penalizing non-compliant plans, which is why we continue to encourage our clients to keep their eye on the ball even though it is easier to follow the media frenzy coming from Capitol Hill.
To help control rising specialty drug costs, the National Business Group on Health has issued a lengthy report including 5 public policy recommendations they hope will educate the marketplace and encourage effective, strategic partnerships.
According to NBGH officials, plan design is the key to managing the use of specialty prescriptions as well as the costs. The report details progress resulting from the aggressive use of utilization review, case management and prior authorization for specialty drugs. Other measures yielding positive results are the design of a specialty tier into the benefits plan and taking measures to administer specialty prescriptions in a facility separate from the hospital. Prescriptions authorized by a hospital or billed under the medical benefit are harder to track and often more costly.
The Altarum Center for Sustainable Health Spending reports a significant drop in health hiring, pricing and spending during the first five months of this year. On average, 22,000 jobs per month were added by hospitals and ambulatory care facilities, compared to 32,000 per month during the same period in 2016. While the healthcare sector continues to be the biggest contributor to overall U.S. job growth, Founding Director Dr. Charles Roehrig expects the 3-year run of greater than 5% growth in overall health spending to end, mostly due to uncertainty over efforts to repeal and replace ACA and a smaller increase in overall spending by consumers.
A recent article in The Self-Insurer magazine described a very simple, straightforward approach to combating the rising cost of healthcare. It featured an approach a law firm is using to encourage and incentivize employees to utilize more cost-efficient healthcare providers.
The firm provides its members with the data needed to compare costs for various procedures, then shares the savings that accrue to their self-funded health plan when a more cost-efficient provider is selected. In some cases, members have received checks for hundreds and even thousands of dollars. Everyone wins according to the CEO and in the process, members learn that shopping for healthcare can be the responsible and rewarding thing to do.
In a previous newsletter, we discussed bundling introduced by Medicare which focuses on orthopedic and cardiac procedures. Through the mandatory initiative for comprehensive care for joint replacements (CJR), which became policy in 2016, some 800 hospitals are participating in the program.
While some sources report the results of bundling as mixed, Medicare reports that joint replacement payments increased by approximately 5% nationally, but decreased 8% for BPCI participants. One large health system achieved a 20.8% episode decrease and another reported a significantly shorter prolonged length of stay – a sign of fewer complications resulting from surgery.
Providers, both acute and post-acute, shared in the savings and indications are that post-acute savings were achieved because their care was bundled, placing these providers at risk. Even though efforts to repeal and replace or modify the Affordable Care Act are on hold, more healthcare providers and payers can be expected to embrace bundling going forward.