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TREND SHIFTING TO SELF-FUNDING

By: Nicola Heredia, CHS Marketing Coordinator

Latest trends suggest that there is a shift in the health insurance marketplace from traditional plans to self-funded coverage. Instead of enrolling with commercial insurers, more businesses, even smaller employers, are considering the self-funded route in an effort to lower health care cost for the company and its employees.

Majority of employers that are currently offering self-funded insurance plans are larger in size, making it possible for them to take on the financial risk of having to pay for large medical claims. According to the Kaiser Family Foundation, only 15 percent of businesses with less than 200 employees are currently providing health coverage by being self-insured.

“Small employers have been talking more and more about self-funding,” said Ken Jeffries, a senior consultant at Mercer, in a Government Executive article. “It’s getting to the point where they’re comfortable with taking on that risk.”

Self-funded plans are not necessarily for every company. Evaluating the overall health of employees can help to determine if this is a fiscally appropriate decision for each business. Smaller sized companies are beginning to consider switching from fully insured plans to self-funded to save and have more control over the coverage plans.

“If you’re a small employer that has a relatively healthy workforce, the insurers are going to have very little flexibility in giving them preferred rates,” reported Jeffries. “I think it’s those employers that may be on the small side but are younger and healthier that are going to look to try and see if there’s a way for them to figure out how to go self-funded.”

The benefits of self-funded insurance plans can outweigh the risks if the plan is managed correctly and the employee population analyzed to ensure that this type of insurance be successful.

Offering insurance plans help companies attract and retain employees. Being able to customize plans to fit the needs of individuals is a positive benefit that is not often offered by companies utilizing commercial insurance plans. Additionally, businesses can enlist the services of Third Party Administrators to manage the plan, coordinate network coverage and other important tasks.

“Smaller employers that can absorb less risk have to look at how one large medical claim could wipe them out,” said Paul Fronstin, director of the Health Research and Education Programs at the Employee Benefit Research Institute, in an Insurance News Net article. “That’s why having the right stop-loss insurance to protect against that is critical.”

The creation of stop-loss insurance has made it possible for smaller companies to opt for a self-funded insurance plan. Enrolling in this type of coverage will provide financial assistance if businesses are faced with catastrophic health claims that employers are unable to pay.

Although stop-loss insurance is available to financially assist companies, there is controversy surrounding this type of coverage. At this time, these plans are not regulated under the Affordable Care Act. This allows stop-loss insurers more freedom to determine if and when they will accept a medical claim. Obama’s administration has discussed creating regulations, but experts have mixed opinions on if that is necessary.

“The new health care law created powerful incentives for small employers to self-insure,” said Deborah Chollet, a senior fellow at Mathematica Policy Research, published in a New York Times’ article.

Escalating health care costs and limited coverage options have led employers to look for other options. For companies with more than 50 employees, providing insurance is required by law but more recently, the industry has seen employers exploring other options then automatically enrolling in the traditional, fully insured option.

COMPANIES FAIL TO MEASURE ROI ON WELLNESS PROGRAM

By: Dennis Riedmiller, CBC from Riedmiller & Associates

As health insurance rates rise, there has long been a push to incorporate wellness programs into the company’s health care plan in an effort to create a healthier workforce that would be less expensive to ensure. While many employers have followed this trend, experts have begun to examine the monetary benefit of these programs.

Return on investment, or ROI, is major consideration when making any decision in business. Investing in wellness programs has often led companies to feel as though they are making progress to reducing medical costs without having actual proof that the programs are working.

The Centers for Disease Control reported that approximately 75 percent of healthcare costs and productivity losses are related to lifestyle choices. This statistic supports the opinion that changing behaviors in individuals can result in healthier, more productive employees in the long-term.

Even though many employers support the implementation of wellness programs, a majority of companies track the financial gain from investing in these health initiatives.

“Employers overwhelmingly expressed confidence that workplace wellness programs reduce medical cost, absenteeism and health related productivity,” reported the Rand Corp. “But at the same time, only about half stated that they have evaluated program impacts formally, and only 2 percent report actual savings estimates.”

Rand Corp conducted a study in 2013 that demonstrated that while employers and their staff were in favor of the programs, few could fiscally show the benefits. This report concludes that their programs have a minimal impact, estimating that after five years the program becomes cost-neutral, let alone generates positive ROI.

Although businesses may not be analyzing the ROI, many still continue to invest in the programs. According to a survey conducted by Buck Consultants, 65 percent of the 1,000 organizations across 37 countries that participated believe that the programs work to attract and retain employees.

“We’re seeing spikes of 15 percent to 30 percent, globally, in the number of companies that are measuring wellness outcomes in areas such as safety, productivity and reduced absences,” says Dave Ratcliffe, a principal at Buck Consultants, in a Human Resources Executive Online article. “There’s more to wellness than just risk reduction – you get increases in moral, engagement and productivity.”

The primary issue that arises across many studies and surveys of wellness programs is that there are so many different ways to measure its effectiveness. One organization may focus on cost effectiveness, while another might measure absenteeism. The lack of consistency in reporting makes it difficult to measure.

“They [health and wellness programs] are really never held to a benchmark,” said Bryce Williams, CEO and president of HealthMine, in an Employee Benefit News’ article. “They are sort of a nice-to-add, but are not necessarily generating real metrics and real ROI.”

Experts believe that ROI must be a factor when creating and maintaining wellness initiatives. Developing company-specific objectives to measure effectiveness is an essential part of establishing a successful program.

“The program evaluation process is probably one of the most important, yet one of the most neglected parts of most wellness programs,” said Bonnie Mechelle Mauldin, founder and director of operation for Atlanta Corporate Wellness LLC, in an Atlanta Business Chronicle article. “It also serves as an important tool in determining if you need to implement changes and adjustments to the program in order to help your participants reach their goals.”

Although there may not be a standard to measure a program against, organizations must still be able to analyze a program’s success against their expectations. Determining why a program exists and what the expectations are will help to create an individualized benchmark.

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