By: Chris Aguiar, Esq.
I read what I thought was a decent article this week on some of the advantages of self-funding but wanted to take an opportunity to comment/elaborate. Always great to see self-funding be touted in the public eye via highly visible media sources. It can certainly be difficult to give a very detailed explanation of this complex risk model in a capped word count article, but something jumped out at me that I thought relevant to note. The author describes self-funding generally as “the employer pays for its own employees’ claims, or at least to a certain amount, while larger claims would be handled by insurance companies”. Certainly that is a model we’ve all seen, but it is indeed only one model and the exact kind of description that drives the misconception that a self-funded plan that uses a traditional stop loss model is not fully self-funded and is therefore insured.
It's important to understand that many self-funded plans do not utilize the hybrid approach this description implies. To the casual observer this description suggests that a $1,000.00 claim is paid by the self-funded plan while a $100,000.00 claim is paid by some other health insurance arrangement entered into by the employer; that’s simply not accurate, certainly not among The Phia Group’s clientele. Rather, for many self-funded plans the plan is at all times responsible for the medical bills and, only after the paying, seeks reimbursement from another insurance company. That company from which the plan seeks reimbursement is not a health insurance carrier, rather, it’s a financial insurance vehicle that protects and ensures the viability of the Plan to make sure benefits continue to be available for all employees/beneficiaries of the plan.
So, just like the $1,000.00 medical bill, the employer/self-funded plan receives the $100,000.00 claim and must evaluate whether it is eligible for coverage and provide said coverage. Only then, does it submit a reimbursement request (assuming the $100,000.00 is above the applicable deductible). It is often the case that for some reason or another, the plan allows for coverage but the request for reimbursement is denied under the terms of the stop loss insurance policy. Certainly, that self-funded plan would tell you that they were unable to “transfer the risk” on that particular claim.
The description above alone is almost 350 words – so we certainly can’t expect an article of about 750 words intended to cover both self-funding and Direct Primary Care, one of the more innovative approaches being utilized by employers to provide more cost effective health plans to their employees, to describe it in depth. Notably, the author did not quote Mr. Thaxter when making that description, so it’s impossible to know exactly how it was described to him. As practitioner in the self-funded space, it’s incumbent on us to do everything we can to educate those who are self-funded, or looking to become self-funded on the benefits, the risks, and strategic and innovative steps that can be taken to minimize the risk and maximize the reward – more cost effective medical benefits!
Catch the article here - https://thebusinessjournal.com/self-funded-insurance-options-come/?fbclid=IwAR3D-CxhWa1vrUy1lkmNMKJTt3cAuucs6v5q7zT4mkQA7ytD9oBQsyl92Pc