COVID-19 has impacted just about every aspect of our lives, and self-funded health plans have not been spared. Along with being mindful of employees' health during the pandemic, employers and HR managers must also be mindful of the state of their self-funded health plans.
More than half of the non-elderly population in the United States receives health care coverage through an employer-based plan. The majority of this group are covered by either fully or partially self-funded health care plans. As such, the health care plans of many Americans could be impacted by COVID-19.
Despite so many Americans having self-funded health plans, many are unfamiliar with the term. So what exactly are self-funded health plans? A self-funded health plan, also referred to as a self-insured plan, is a health an welfare plan through which the employer takes on the full financial risk associated with providing health care benefits to employees. Usually, self-insured employers establish a special trust fund to cover incurred claims.
Self-funded and fully insured health plans operate similarly. Money is collected and covers medical expenses for the insured population. Where self-funded plans differ from fully insured health care plans is that self-funded plans do not pass the responsibility for the financial risk onto a third party, which fully insured plans do; in a self-funded plan, claims are usually paid with a mixture of the plan sponsor's (i.e. the employer’s) assets and employee contributions.
Fully insured plans are what most people think of when they think of health insurance; it is a more traditional model, and self-funded healthcare has changed that model for the better.
How has COVID-19 impact on health care spread to the self-funded industry? What has been the financial impact of COVID-19 on the self-funded industry? Currently, benefits professionals are working hard to ensure stability for organizations during this chaotic time, and to figure out the answers to these difficult questions.
Employers with self-funded health plans are also working hard to ensure that their employees and employees' dependents can access COVID-19 testing, treatment, and medical assistance while the entire country copes with this pandemic. A self-funded health plan insures many people generally over a long period of time, which is why protecting the plan's financial viability and assessing the possible financial effects of COVID-19 is essential for employers and HR managers.
Projecting the possible financial impact of COVID-19 on a self-funded health plan is no simple task, as numerous variables should factor into projections, such as the number of infected plan members, the duration of shelter-in-place orders, employee furloughs, and many more factors. Despite these challenges, employers are still working diligently to address challenges related to COVID-19 and health care, such as adjusting eligibility standards, expanding benefits, and waiving cost-sharing for treatment related to COVID-19 performed by in-network providers.
Many employers are also relaxing open enrollment restrictions and offering more flexibility to individuals who want to join a company's benefits plan outside the traditional open enrollment period. Due to job losses, many individuals and their dependents are finding themselves without coverage, so many are scrambling to find other insurance coverage wherever possible.
Many employers are unsure about how COVID-19 will impact group health care plans. While expenses for the treatment and testing of COVID-19 are rising, utilization is down for elective and preventive services. Even employee benefits experts are still unsure of how the pandemic will continue to impact health plans, with some experts predicting an increase in employer health care costs and others predicting a decrease.
Employers who have self-funded group health care plans need to be particularly mindful of this wide range in predictions and take steps to ensure the financial viability and stability of health plans during the COVID-19 crisis. Since every plan is different, employers and HR managers will need to consider their own employee populations when trying to predict future costs and utilization, as well as their own business needs.
If your company has adjusted coverages to account for services related to COVID-19, you need to amend plan documents to reflect these adjustments. Coverage requirements have been expanded for all health plans as a result of the Coronavirus Aid, Relief and Economic Security Act and the Families First Coronavirus Response Act. Many major insurance carriers in the U.S. have chosen to go beyond requirements set by the new legislation, such as by waiving cost-sharing for COVID-19 related hospitalizations.
Though there may be a drop in health care costs in the short-term, most experts agree that this will not be the case forever. After the pandemic, there could even be an unusually sharp increase in health care costs as a result of individuals delaying care during the pandemic, and resuming care immediately afterwards.
Shelter-in-place orders could also lead to a spike in behavioral health claims due to issues with anxiety, stress, and depression. Many Americans are dealing with the loss of loved ones and loss of employment, along with loneliness as a result of unprecedented isolation. Changes in supply and demand could also contribute to an increase in health care costs. As such, you should continue accruing funds in anticipation of a need for these funds in the future.
Consider whether you want to add telemedicine to your self-funded health plan. Though historically telemedicine has seen a low level of usage, the appeal of telehealth services has spiked during the COVID-19 pandemic. Through telemedicine, which often now includes video conferences, individuals can access medical services without leaving their homes.
Even post-pandemic, telemedicine is likely to remain a popular option for Americans who want to receive medical services from the convenience of their own homes.
Now is the time to reevaluate how the characteristics of your company's insured population could negatively affect a self-funded health plan. Are the employees frontline restaurant workers, retail workers, health care professionals, or other employees who frequently come into contact with the public and may be at a higher risk of becoming infected with COVID-19? Factors like that can greatly alter a self-funded plan’s viability.
Has your company reduced staff? Furloughing or laying off employees could increase the volatility of claims. Volatility increases as the number of insured employees decreases. These changes in risk level could negatively affect your health plan and should be addressed.
The Phia Group, LLC has been working to ensure that health benefits remain affordable for employers and employees. We tailor our various cost-containment services to our clients' specific needs. If you are ready to regain control of your operations, including switching from “traditional” insurance to a self-funded health plan, we can help you minimize costs while maximizing benefits.
We provide consulting services to address a wide range of compliance concerns, business disputes, and claim-specific dilemmas. Learn more about our independent consultation and self-funded health plan evaluation or contact us today.