How to Mitigate Risk With a Self-Insured Health Plan
Mar 24, 2020
3 min read
Offering a self-insured health plan can be an ideal strategy for large employers interested in cutting costs and providing robust benefits for their employees. But employers need help assessing and mitigating the risk of self-insuring.
With a self-insured health plan, employers operate their own health plan rather than purchasing a fully insured plan from an insurance company. The employer also takes on the financial responsibility of employees’ benefits claims and expenses. In most cases, the insurance company manages the payments, but the employer covers the cost.
A self-insured plan can potentially reduce costs for employers: Instead of paying an insurance carrier to take on the risk of your employees’ health care, you’re taking on that risk yourself. When employees use more healthcare services, you’ll have to pay more—but when they use fewer services, you get to keep the cost savings.
Because healthcare is both expensive and unpredictable, even companies that choose to self-fund their employee health plans need some protection against catastrophic or unpredictable losses. For instance, since early 2020, thousands of Americans have been diagnosed with the new coronavirus, COVID-19, resulting in extra costs for health plans and members. But employers can take two important steps to mitigate risks—even catastrophic—in their self-insured health plan. And there are two important steps employers can take to mitigate risks in their self-insured health plan.
- Design your plan with risk in mind. One of the greatest benefits of a self-insured health plan is the ability to benefit financially as your workforce becomes healthier and more productive. For instance, you could incentivize employees for losing weight, quitting smoking or making other health behavior improvements—and the resulting healthcare savings will translate directly to your bottom line.
With a self-insured plan, the employer has access to employee healthcare usage data, and can use this data to make informed decisions about your plan’s offerings rather than simply going with what an insurance company provides. You can design a plan that prioritizes preventive care. For instance, choosing a value-based plan design can encourage employees to get care for chronic conditions before they escalate. You can also select specific programs based on the needs of your employees; for example, you might choose care coordination, disease management or pharmacy benefits programs.
- Choose comprehensive stop-loss coverage. Stop-loss insurance will cover an employer’s losses from self-insured plans when those losses exceed a certain limit (also known as the deductible). To protect your [QUESTION: Isn’t this post directed at the employer?] bottom line, you can customize your stop-loss coverage to meet your needs.
Most employers need a combination of two forms of stop-loss coverage. Specific stop-loss, also known as individual stop-loss, provides protection against a high claim on any one individual. Aggregate stop-loss provides a ceiling on the dollar amount of eligible expenses that an employer would have to pay in total during a contract period. The insurance carrier would reimburse the employer after the end of the contract period for any aggregate claims.
In the past, the cost of stop-loss coverage has been prohibitive for some employers. Fortunately, these policies have become more affordable and are no longer priced out of reach for smaller employers who might self-insure.
To learn more about self-insured health plans and Lucent Health, visit https://lucenthealth.com.