People like having a choice rather than a single option—it’s basic human nature. When it comes to healthcare, no one wants to make the wrong choice—especially employers—when so much of their spend goes to healthcare for their employees.
Every company is unique, and so are the people who work for them. Today, employers have a comprehensive choice of healthcare options for their employees apart from the standard fully insured health insurance policy. Employers have the option to self-fund, which enables employers to pay for their employees’ medical bills directly while a third-party administrator (TPA) typically administers the plan. The TPA is responsible for facilitating the claims processing and payments, the healthcare network, financial reporting, and other various benefits administration services, as needed.
Compare that with a fully insured health insurance policy, which consists of employers paying an annual premium to an insurance company that assumes all financial risks (regardless of whether the employees used the plan or services).
The Rise of Self-Funding
Historically, larger companies of more than 500 employees have favored self-funding, with the aim of reducing costs. Today, small- to mid-sized companies are now starting to see the benefits of what self-funding provides. From 2013-2016, the number of small businesses offering at least one self-insured plan rose 31 percent (and an estimated 15 percent among mid-sized businesses), according to the Employee Benefit Research Institute (EBRI).
In addition, the EBRI found the number of private-sector businesses offering at least one self-insured plan grew to 38.7 percent in 2018, up from just 26.5 percent in 1999. A big reason for the growth has been the goal of reducing costs. Larger employers in the United States are expecting their healthcare costs to jump an average of 6 percent this year if they don’t make the necessary adjustments to contain costs, according to the 2020 Large Employers’ Health Care Strategy and Plan Design Survey by the nonprofit National Business Group on Health (NBGH).
The Benefits of Self-Funding
• Cost Savings: Employee benefits comprise an estimated 32 percent of employer costs of compensation for workers in the U.S., according to the Bureau of Labor Statistics. When employers choose to self-fund, they have the ability to control costs by paying for claims as they are incurred rather than paying a monthly premium.
• Customizable and Flexible Plan Designs: Healthcare is not a one-size-fits-all solution. Employers who self-fund have the ability to design their own health plans to meet their specific needs.
• Transparency: Employers who self-fund are given insight into their health plan, including various claims, spend, and utilization reports. This gives the employer the ability to review their plan and make any necessary revisions to the plan that will benefit not only the company but also their participating employees.
Additional Ways to Cut Costs
There are countless ways a self-funded employer can save in costs, including utilization management, disease or care management, stop-loss protection, and wellness programs. We launched Pinnacle Claims Management, Inc. (PCMI) in 1996 to assist employers that wanted to self-fund their health benefit plans. PCMI works as a third party administrator and takes the burden of administering a more flexible health plan off employers.
In the years since, we have continued to expand our services to offer employers more ways to save through self-funding. Our clients can upgrade their plans and take advantage of PCMI’s additional offerings to help them save in the areas of:
• Pharmacy costs: PinnacleRx Solutions (PRxS) offers employers a number of tools, reporting capabilities and other solutions to help them better manage rising employee pharmacy costs.
• High medical costs: Pinnacle Health Management (PHM) can reduce high medical costs for employers by implementing care management and/or wellness programs. PHM has nurses on staff to help employees with chronic conditions that include asthma, diabetes, high cholesterol, weight management, and depression.
• Stop-loss: Pinnacle Risk Management Services (PRMS) offers custom stop loss solutions to reduce the risk associated with paying out claims over a certain specific and aggregate deductible.
Employers have a lot on their plates without the added layers of healthcare complexities. Fortunately, there are companies that have experience cutting through those layers and guiding you through the best options. When employers have a better understanding of all their options, everyone wins.
If you don’t have a WGAT plan, contact Western Growers Insurance Services for more information and to see how it can help you better manage your healthcare costs. You can reach a sales team member at (800) 333-4942.
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