Self-funding your health benefit plan can be rewarding for employers, but many are discouraged to implement change simply for fear of the unknown. On the contrary, with self-funding employers gain a clear discovery of actionable, cost-saving measures. “There’s total transparency in all aspects of the health plan,” said Joseph Holt, vice president of sales and marketing for Auxiant, a third-party administrator. The key is to anticipate problems and develop solutions before trouble arises. Below are our top tips for self funding.
Here’s our best advice for employers self-funding their health benefit plan:
Tip #1: Look at Self-Funding as a Long-Term Solution
“Employers considering self-funding should plan to be in it for the long haul,” said Sharee Bowsher, regional sales executive for Serve You Rx, a pharmacy benefit manager. Self-funding gives you information about employees’ health and well-being that makes it possible to target very specific health issues. It can take months or years for these strategies to pay off, so only employers who are committed to self-funding will reap the benefits. Talking to other self-funded employers can help you understand what challenges may lie ahead. Your benefit adviser and vendor partners can also help. “Employers can set themselves up for success with the proper planning,” Bowsher notes.
Tip #2: Be Patient by Seeing the Big Picture
Our second top tip for self-funding may seem obvious, but it’s important. Employers can be discouraged if, for instance, they urge employees to take medications for chronic conditions like asthma or high blood pressure and their pharmacy benefit costs suddenly rise. But before you worry, Bowsher suggests checking the changes in your overall medical plan, where fewer emergency care, urgent care, and hospital admissions can produce savings that outweigh additional medication costs tenfold. It just may take a little time.
Tip #3: Choose a TPA that Coordinates Your Medical Plan & Stop-Loss Policy
Until you’ve coordinated your medical plan language with your stop-loss policy, there can be gaps in stop-loss coverage. “These gaps can be costly,” said Jayne Feagles, regional sales director for Auxiant. She offered this example: an employer with a handbook policy that allows an enrollee on a leave of absence to have an extra 30 days of health coverage after they exhaust their paid time-off, vacation time, or family medical leave. If that information is omitted from the plan document, the stop-loss policy won’t cover it. And if the enrollee has an expensive health crisis during those 30 days, the employer could end up paying for high medical costs that would otherwise be covered by stop-loss insurance. Feagles adds that requiring employees to rely on COBRA to extend their health coverage would be a better way to avoid this problem. Also, employers who partner with The Alliance can rest assure they will receive expert guidance on avoiding gaps in policies.
Tip #4: Have an ERISA Attorney Review Your Employee Handbook
Our fourth top tip for self-funding deals with ERISA (The Employee Retirement Income Security Act of 1974). These rules govern self-funded health plans, which means when you publish an employee handbook you should have an ERISA attorney review it. Why? If you experience turnover within your human resources department, the new HR employees may not realize the impact of handbook changes or the need to seek out ERISA experts. “It’s important to coordinate what’s in the handbook – such as when COBRA coverage begins with what’s in your health plan,” Feagles said.
Tip #5: Choose Vendors That Coordinate For You
When adding specific language in your medical plan to address emerging problems, make sure you alert all your vendors. For example: an employer may use the medical plan document to restrict off-label usage of prescription drugs, which means the drug is prescribed for conditions other than those approved by the Federal Drug Administration (FDA). If the PBM (pharmacy benefit manager) is unaware the employer bars covering off-label usages of prescription drugs, or lacks a process for flagging those claims, the claims may be approved anyway.
Tip #6: Use Reports to Help Integrate New Data
The data you gain from a self-funded health plan can help you make important decisions about coverage levels, care management, and other issues. But sometimes they are difficult to interpret when each vendor provides a separate report, and some vendors may not give you any reports. Some employers give up and try to move forward without reports, but self-funding with The Alliance can help integrate your reports – from the TPA, PBM, and network – so employers get information that allows them to take educated action.
Tip #7: Remind Employees of Services with Meetings and Handouts
Employers often launch programs that offer services like telemedicine, steerage, or care management to employees, but then fail to regularly remind them and their family members about their options. Employees will appreciate their self-funded health benefits but, as Feagles said, “enrollees have to understand what the program is and what it means to them.”
Some employers refuse to do anything beyond sending out handouts when the program is launched, then blame the program for failing to engage enrollees. Instead, employers must be willing to share information on an ongoing basis, including who to call when problems arise. “Put a little effort into employee communication and it will certainly pay off,” Feagles adds. That’s why a consistent approach to ongoing enrollee education – and a single contact number for enrollees – is built into self-funding with The Alliance.
Tip #8: Design Financial Incentives With Purpose
Increasing enrollees’ out-of-pocket costs can reduce spending, but Joseph Holt, vice president of sales and marketing for Auxiant, warns that there is a point of diminishing returns. “People will avoid care because they can’t afford the out-of-pocket cost,” Holt said. “When you make a consumer say, ‘I can’t afford $600 a month for the prescription so I’ll stop taking it,’ you can turn what would have been an $8,000 claim for the year into an $80,000 claim because of complications.” Good reports can help employers make plan design changes that drive the right enrollee behavior, like choosing urgent care over the emergency room, or having an MRI at a low-cost, high-quality clinic.
Tip #9: Use Value-Based Benefit Design (VBBD)
There is evidence that patients with some types of chronic conditions – such as diabetes, high blood pressure, and asthma – have lower overall health care costs when they take medicines regularly and comply with other medical recommendations. Value-based benefit design typically reduces patients’ share of costs for medications used to manage these conditions. Three tactics to increase the likelihood of a positive return on investment (ROI) from value-based benefit design:
- Know your population through conducting preliminary analyses and modeling;
- Coordinate programs across your health plan, including the PBM, disease management vendor and other key players;
- Develop an enrollee communication plan that emphasizes program benefits to patients and providers.
Ready to Make a Plan? Contact our Business Development Team
Sharee Bowsher, regional sales executive, Serve You Rx.
Jayne Feagles, regional sales director, for Auxiant.
Joseph Holt, vice president, sales and marketing for Auxiant.
Melina Kambitsi, Vice President, Business Development and Member Services, The Alliance