Can small schools, cities or counties benefit from self-funding?

More and more small schools, cities and counties (under 100/200 employees) are moving to self-funded medical plans in search of more control and lower costs. In the past, self-funding was only something larger organizations attempted. Things have changed. Today, more than 17% of employers with 3-199 employees have successfully moved to self-funding.[1]

Historically, large organizations were the only groups who benefited from self-funding because their large employee base was enough to spread the risk. Stop loss carriers were hesitant to quote small groups, which is why so many continued to stick it out with their fully-insured plans.

However, as premiums continue to rise and all organizations are on the hunt for cost savings, small groups are finding creative ways to reduce their risk when moving to self-funding. When smaller employers use the following tactics to lower their costs and decrease risk, stop loss carriers are suddenly more interested in acquiring small groups as customers.

Here are some of the tactics small organizations use when self-funding their health plan:

Create a narrow network

A narrow network plan with lower premiums is increasing in popularity. It limits the number of network providers (doctors, hospitals, etc.) that employees can see. Studies have shown that in narrow network plans, employees may see their primary doctor more but use the emergency room less than other patients. They also choose to use fewer expensive healthcare services, keeping costs down.

Encourage medical consumerism through your plan design

Many employers are implementing a high deductible health plan (using a Health Savings Account/HSA or a Heath Reimbursement Arrangement/HRA). With these plans, employees must take a more active role in their own health care decisions including shopping around, comparing prices, finding low cost quality service, etc. Their prudent medical spending can lead to lower claims costs, which is always an attractive quality for stop-loss carriers.

Use a Service Such as Claims Re-processer or Medical Concierge

A Claims Re-processer can review your claims to look for discrepancies and errors, then advocate for the patient. They can also renegotiate prices to help lower your claims cost.

A Medical Concierge service can help employees be confident in selecting a doctor, communicating with medical providers and managing medications, as well as understanding the importance of preventative exams and assessing treatment options based on cost, risk and benefits.

How to Start

If you are a small school, city or county looking to move towards self-funding, hiring a health insurance consultant is your first step. Don’t try to go it alone. While the costs may not be in budget, realize that it may be offset by the savings they can bring the organization. Furthermore, some consultants may even get paid through commissions from the insurance carriers.

The right consultant will be a lifesaver when you’re considering change. They can bring an unbiased, yet expert opinion, highly creative ideas, run all the numbers and even go to the board meetings with you to state your case. It is especially beneficial for smaller organizations that may lack the workforce, time or commitment to implement a larger change.

Here are a few things to look for when hiring a health insurance consultant:

1. Experience – You need a consultant/company who has previous experience working with school, city and county employee benefits. Commercial insurance is radically different in nature than public sector insurance. You need someone who understands the nuances of your plan and how your organization operates. The more experience your consultant has working with your type of organization, the more ideas and solutions they can bring to the table on to help you make your plan better.
2. Knowledge – What is your consultant’s educational background? Do they belong to a professional organization or have any certifications? How long have they worked with employee benefits? How many schools, cities and counties have they worked with? Experience and knowledge go hand in hand and the more they know about working with your specific type of organization, the better.
3. References –You’ll want to choose a consultant who has a good reputation in the industry. Ask for referrals from companies similar to yours in size and scope.
4. Organization – Learn more about the organization your consultant works for. See if their mission statement, code of ethics, etc. aligns with your organization. This can provide a little more insight into your consultant as well.
5. Personality and Fit – Personality is key. This person will become a member of your team. It’s important that you and your colleagues feel comfortable and trust that they will make good decisions for your organization.
6. Plan Management – Can they effectively manage your plan? A good consultant can identify cost and utilization disparities using claim analytics and benchmark your data against national norms. Other tools for plan management include prescription reports, disease profiler, drill-down features to get to the root of a problem, alternative modeling and decision support tools. Decision support tools allow you to “test drive” potential changes, so you can see the impact of a change before making any decisions.

[1] http://kff.org/report-section/ehbs-2015-section-ten-plan-funding/TB_inline?1=1&width=800&height=580&inlineId=exhibit-10_1