Tag Archives: Self-Insured

2018 Stop-Loss Survey

February 25, 2019


Last year we published our inaugural Stop-Loss Survey, which allowed employers and their advisors to more accurately benchmark deductibles and premium levels based on peers of similar size and geographic area. As a result of the success of our 2017 Marsh & McLennan Agencies Stop-Loss Survey, we are excited to share with you the results of our 2018 survey. The upper Midwest region of Marsh & McLennan Agency (MMA) is comprised of 11 offices in 10 states providing employee benefits consulting to 2,500 employers throughout the USA.

As with all aspects of the insurance industry, the only constant is change. The stop-loss excess insurance market is no exception to the innovative cost containment strategies being implemented by payers and their customers, the employer. Expanded utilization of shared risk arrangements by third party administrators (TPAs) and providers, broad interest in reference-based pricing, growth of employer stop-loss captives and the advent of what is expected to be the first million-dollar prescription are just a few of the pressing topics our employers and consultants are implementing strategies around. Now more than ever, ensuring appropriate coverage levels and premium rates remain the focus for most employers.

To provide benchmarks for reinsurance coverage that are representative of local markets, 243 MMA clients were surveyed. These respondents cover nearly 200,000 employees and vary in size from nine to 20,000 covered employees, with an average of 825. Of the respondents, 99% purchased some level of specific (individual) stop-loss coverage, although at varying levels from $20,000 to $1,000,000 per individual. In addition, 135 (56%) of employers purchased some level of aggregate coverage with corridors ranging from 10% to 25%.

For the full survey please click here: 2018 Stop Loss Survey

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Cost Reduction Strategies for the Self-Funded Employer

April 18, 2017


When evaluating cost savings strategies, employers often find themselves in the cycle of making plan design changes or shifting the cost to their employees. While these tactics may offer savings, they do not deliver the long term results employers are seeking in their efforts to rein in costs. Join us on May 10th to learn about the latest trends that can maximize bottom line savings and support your organization’s employee benefit strategy.

Click here to learn more about this special event!

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On-Site Clinics

December 10, 2015


Just as the emergence of public and private exchanges has changed the landscape of how and where Americans purchase health insurance, so has the emergence of increased accessibility to ambulatory care, particularly in the form of employer-sponsored on-site and near-site clinics.  For years insurance carriers and employers have taken steps to guide plan participants to the most appropriate place of service for care, i.e. an urgent care center instead of a hospital emergency room for a non-life threatening situation, or a physician office instead of an urgent care setting for a condition that can wait for treatment until normal office hours.  Now there’s a new place of care gaining prevalence that can be the most appropriate and most cost effective place for urgent, chronic, and preventive care.  That place is the on-site clinic.

The concept is this:  employers provide employees with a place to receive care for themselves and their dependents that’s conveniently located on or near the employer’s facility.  Patients can be seen by a physician or nurse practitioner, have lab work done at the clinic and pick up their prescribed medication.

The benefit is this:  employees typically pay nothing for the care received (with the exception of those employees participating in a QHDHP with HSA who pay an established fair market value for those visits that are not considered preventive care).  The recommendation by many on-site clinic vendors is that the employee pays nothing for the visit.  Their research has shown that even the slightest out-of-pocket cost can deter the patient from seeking care at the clinic.

The employer bears the cost of the clinic set-up, physician and staff salaries, lab work and prescriptions.  Typically the on-site clinic vendor will strategize with the employer on the initial build-out of the clinic, i.e. determining how much square footage is needed, if one location will suffice or if more than one is needed to cover the population both for volume and geographic accessibility, as well as an assessment of how many days & hours per week the clinic will need to be open. The vendor typically assesses a PEPM charge for the physician and staff services, with costs for lab and prescriptions passed directly on to the employer. Typically the on-site clinic will have a drawing station for labs, with the specimens sent directly to a contracted laboratory for evaluation.  The prescriptions stocked in the dispensary typically consist of the most commonly prescribed generic medications.

On-site clinics are fairly sophisticated; most have their own electronic medical records system and a patient portal for scheduling appointments.  The patient experience can be different from what’s experienced in a private physician office, starting with little to no wait time to be seen, and an average time allotment of 15 minutes spent with the physician.  Chronic condition and wellness coaching can be provided as well as coordination with an employer’s wellness program.  If necessary, the clinic physician is prepared to make referrals outside of the Clinic to the Plan’s network specialists.

A technique some employers have found success with in getting their employees to initially use the on-site clinic is by offering biometrics and health risk assessments at the clinic.  The patient then receives a consultation on the results, which begins their interaction with the clinic staff.  Regarding clinic staff, employers are typically involved in the hiring process as its key to get a physician and staff who will fit well with the employer’s population.

The establishment of on-site clinics is on the rise, primarily with employers self-funding their medical benefit plan.  It’s much more than a cost-shifting or cost-reduction mechanism, rather a new way to provide participants with convenient, quality health care, without the consideration of paying a (potentially large) deductible or copay in order to access care.  Many employers are in the feasibility analysis stage, weighing the cost of the clinic set-up vs. the return on investment achieved when care is delivered at the clinic vs. traditional places of service.  Weighing investment in an on-site clinic can be an exercise in shedding the “penny-wise and pound-foolish” approach to financing health care.

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Self-Funding 101 – Back to the Basics

February 7, 2014


self101Employers of all sizes are taking a closer look at self-funding their employee health insurance plan. After all, Healthcare Reform has everyone considering things that otherwise would have been left as just an idea in the past. And while the concept of self-funding isn’t anything new for larger employers, it may seem like a foreign language to smaller companies or HR Directors whose past experience has always been in the fully-insured arena. There have been plenty of articles written lately on this subject. Most do a wonderful job explaining the details and intricacies of self-funding, just as long as the reader understands the basic concept of the topic. This article is written for those just being introduced to the concept of self-insurance. It will give you a fundamental understanding of what self-funding is and should get you thinking about whether it’s right for you and your company.

For employers that currently offer a fully–insured health insurance plan, the concept of moving to self-funding can be overwhelming. Today you pay your premiums, hopefully your employee claims get paid with little ado, and you meet with your consultant at renewal time. Together you try to figure out why you’re getting the renewal that is being offered by the carrier with little to no substantiation. Year after year we are frustrated with this process, but it’s something we reluctantly accept. While being fully-insured can be frustrating and leave us feeling somewhat helpless, it can also be the easiest path to take.

How many times have you heard of a scenario like this? A large claimant on a fully-insured planned is wreaking havoc on renewals and there’s no other choice but to “grin and bear it”. The renewal is exponentially higher as a result and it’s something that begins to compound year after year. Eventually the claim ends and you hope that your current carrier will recognize this, but chances are the only way to see lower premiums is to change insurance companies, which is too bad because your employees really like the carrier you’re with. Sound familiar? Self-funding allows you to approach this scenario in a completely different manner.

Without a doubt, the mindsets of those that are fully-insured versus those that self-insure their plans are vastly different. First and foremost, in order to be self-insured you have to be tolerant of risk. With fully-insured plans your annual costs are, for the most part, “fixed”. You essentially know at the beginning of the year what you are going to pay. Self-funding has a fixed cost component as well, but it’s a fraction of the plan’s total cost. The majority of dollars will be spent paying your own claims, a variable that will fluctuate month to month, year to year. Being self-funded means you have to be mentally prepared for these swings and accept the risk that some month’s cost may be more than what you would have paid staying fully-funded.

Fixed Costs:

Self-Funding often allows an employer to “unbundle” their medical plan and select different pieces to complete their program. Generally speaking these pieces include a Third Party Administrator (TPA) to administer and pay claims, a Pharmacy Benefit Manager (PBM) to administer the prescription plan, a provider network your employees will use to access their in-network medical benefits, and reinsurance to cap your liability associated with paying your own claims. The cost for these services is the “fixed” costs associated with Self-Funding and it’s imperative to keep them as low as possible in order to pay your claims and maintain the financial advantage over fully-insured. The most expensive item in the fixed cost “bucket” is reinsurance. Specific Stop Loss Reinsurance is purchased in order to cap individual (specific) claims in a policy year. Aggregate Stop Loss is purchased to cap the entire (aggregate) group claims in a policy year. Choosing an appropriate specific stop loss level is something that you must do with an experienced employee benefits consultant.


Paying your own claims essentially accounts for the rest of the liability associated with Self-Funding your medical plan. This bucket of costs is a variable that will need close scrutiny in order to accurately set your annual budget. Unlike Fixed Costs, your claims will be different each month and it’s important to understand the ebbs and flows associated with them. The first year of claims can be misleading. The period of time between when a claim is incurred and when it is actually paid will cause some of the first year claims to be paid in the second year. Therefore, what the plan actually pays in the first year will be artificially lower than in subsequent years. Work closely with your consultant to make sure you plan properly for this and purchase your reinsurance taking into consideration that some claims will be paid in a year other than when they were incurred.

Your company’s cash flow is a big factor when considering Self-Funding. The reinsurance you purchase is designed to cap claims per each member as well as for the entire group, but reimbursement from your reinsurance carrier for claims exceeding those caps won’t always happen immediately. Audits and further adjudication of those claims may potentially delay reinsurance payments for months. While some reinsurance contracts include provisions to assist in this situation, it’s important to understand the cycle of a reimbursement and account for these potential delays. Not every reinsurance contract is the same, and some may leave you with additional risks if you don’t pay attention. A nasty, but common, practice in the reinsurance arena called “lasering” will expose your plan to additional liability for a larger claim. At the renewal of your reinsurance, a carrier may decide to exclude a certain claimant from the specific stop loss level that your other members are protected with and increase the exposure you would have on that one claim. It’s simply a transfer of risk from them to you and without proper disclosure it can leave you and your plan at risk. Work closely with your employee benefits consultant and choose a carrier that offers the reinsurance coverage that fits your needs and provides the protection that fits your budget.

As sensible as it sounds “claims are claims – you pay them when they occur” sums up self-funding and is quite different than being Fully-Insured. My scenario mentioned earlier speaks to this. A large claim may linger for years within your fully-insured premium, even after the claim has subsided. Of course this all assumes that you are aware of the claim in the first place. Often with smaller employers the insurance carrier will elude to a large claim when it’s time to renew, but offers little substantiation or details concerning the claim. With Self-funding you “own” your claims. Of course you will never get personal information on the claimant, but those claims are yours to pay and once it’s done, it’s actually done. Reporting of your claims activity is available monthly, quarterly and annually and can be used for many things including proper renewal forecasting, budget preparation, establishing proper employee contributions, focused wellness initiatives, etc. Claims and plan reporting is a distinct advantage of Self-Funding.

How it works:

Generally speaking, your members will see little difference between fully-insured and self-insured plans. ID cards are generated with customer service numbers and benefit outlines just like they would with a fully-insured plan. In fact, being self-insured allows an employer to be involved in the creation of the ID card and has some influence on how the card looks and what it includes. Members use their cards in the traditional fashion, making sure their providers have a copy to know where to file claims. The life of a claim is similar to a fully-insured plan. The member seeks service, the provider files the claim with the provider network which applies applicable discounts and then sends the claim to the TPA. The TPA processes the claim and uses employer funds from their banking account to pay the provider. Most often weekly check registers are sent from the TPA to the employer listing claims to be paid and awaits approval from the employer. Money is then wired from the employer’s bank account to the TPA and is then disbursed to the providers.

Employers that self-fund their medical plan often express a more positive reaction to the renewal of their plan. The process of renewing a medical program that is self-funded is often more strategic in nature. Concerns about plan design and meeting objectives replace deliberations on making sense of an increase from a fully-insured carrier with little supporting evidence. If a change is needed, generally speaking it’s the reinsurance carrier that is marketed while all other pieces remain intact. This change is transparent to members as opposed to a fully-insured renewal where the entire plan will change with a new carrier.

Employers that Self-Fund their medical plan soon learn and recognize that it truly is their plan. Compliance issues with State and Federal Laws which were once addressed by the insurer of their fully-insured plan will now be their responsibility. The claims that the plan pays are on their members, based on a benefit plan design that fits their needs. The flexibility associated with choosing pieces of the fixed cost puzzle allows an employer to choose a provider network, TPA, PBM and reinsurance contract that accomplishes their goals, not the goals of a fully-insured insurance carrier. If you’re ready to take ownership of your group’s health insurance plan and can stomach the ups-and-downs of paying your own claims then self-funded may be right for you and your organization.

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