4 Common Structures for Self Insured Employee Medical Plans

Self-insured strategies are not one-size fits all: Here's what you need to know to find the right fit for your company

 Without good information there is no way to make good decisions. This is what has made entities such as yelp, TripAdvisor and CARFAX a key part of the fabric of our decision-making process when it’s time for us to pick a restaurant, a place to visit on vacation, or a new car. And when making a decision on which self insured plan works best for your company, having all the information on hand is equally paramount when analyzing the various advantages and disadvantages each plan has to offer, such as:

  1. Level Funded: With this plan you pay a fixed cost each month. At the end of the year’s accounting, and if claims fall below what the insuring entities have projected, as an employer, depending on the insurance company you use, the difference in funds will be returned in total or 50%. Similar to a fully funded plan, you pay the same rates every month based on the number of employees covered. However, unlike a fully insured plan, you will be able to receive reports on all employee claims. This plan is considered a good way for employers to put just a toe in the water, to see if they are comfortable with a self insured plan. 
  2. Bundled Structure:  Here you have access to all services (claims payment, medical management, pharmacy management, etc.), as well as the network and stop-loss with one insurance company.  While this may seem easier, negotiating pricing for the fixed expenses to operate the plan, ie. claims payment and stop loss insurance, is more difficult as the carrier knows your decision to move to another insurance company will impact your employees.
  3. Unbundled Structure: Allows you to look at the entire insurance marketplace and choose the best partner in terms of claims payment, medical management, pharmacy management, stop-loss, and so forth.  You get to pick the network you want to go with, depending on need, cost, employee locations, etc.
  4. Reference Based Pricing (RBP): Where with other plans all the pieces have to be in place, an RBP allows the use of a Third Party Administrator (TPA) to perform such duties as process claims and buy stop-loss, among other services.  When using a RBP approach, you do not contract with a network.  Your employees can go to any provider.  The providers are paid based on a percentage of the Medicare Fee schedule.  The providers should be advised in advance when it is an elective procedure of the percent of Medicare the plan will pay.  If the provider will not accept the Medicare allowable, the potential for balance billing should be addressed when the plan is built.  Employee education is critical.   And with newer variations of an RBP, some employers are including paying any gap in the balance of the bill, choosing not to leave their employers in the lurch.

It is very important to understand the differences in all structures when choosing a self insured employee medical plan, especially when it comes to all the plus-minuses, the benefits to your company and your employees, the flexibility you need, and the overall plan design. By doing so, you will be a well-informed consumer and fully assured of obtaining the right plan to meet the needs of your organization and your employees.  Our team at twentytwenty has worked with self insured employer plans for over 3 decades; we have the experience and expertise to help you figure out which structure makes the most sense for your organization.