Managed Care Outlook
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7/12/11 10:16 AM Self-Funding: A Way to Save on Healthcare Costs Page 1 of 2 http://hr.blr.com/HR-news/Benefits-Leave/Healthcare-Insurance/Self-Funding-A-Way-to-Save-on-Healthcare-Costs/ HR and Employment Law News Free Special Reports Get Your FREE HR Management Special Report. Download Any One Of These FREE Special Reports, Instantly! Top 10 Best Practices in HR Management for 2011 5 Mistakes Everyone Makes with Job Descriptions and How to Avoid Them Critical HR Recordkeeping 5 Tips for Creating HR Policies That Will Hold Up in Court 7 Strategies for Effective Training Win the Recruiting War Beyond the Hype: Make Wellness Work for Your Workplace Featured Special Report Claim Your Free Copy of Critical HR Recordkeeping Employee record retention is a daunting task for employers because there are so many different requirements based on a variety of criteria. For example, virtually every federal employment law, ranging from the Americans with Disabilities Act to Title VII of the Civil Rights Act, stipulates certain record-retention rules for all private sector employers. In addition, many state and local jurisdictions impose July 11, 2011 Self-Funding: A Way to Save on Healthcare Costs Many employers no doubt believe that being self-insured— collecting premiums and paying for employees’ healthcare expenses from those funds—is only for big, deep-pocket organizations. Joe Berardo, CEO of MagnaCare, believes it can work well for companies with as few as 15 employees. For a Limited Time receive a FREE HR Report on "Critical HR Recordkeeping.” This comprehensive HR report covers how employers can take critical document from a daunting task to simple! Download Now What’s changed for employers since the ACA? Our first question for Berardo, whose company manages health plans for employers in New York and New Jersey, dealt with the impact of the Affordable Care Act (ACA) on such plans. In fact, he says, although the ACA has not yet done much of anything to reduce healthcare costs, it does increase the benefits of self-funding. There are two reasons for this: First, under healthcare reform, plans can no longer cap medical benefits beyond a certain level. Self-insured companies faced with this barrier can call on stop-loss carriers, whereas the carriers for fully insured organizations absorb those losses—and then charge the employer more the following year. Second, most fully insured organizations pay brokers’ fees, which became very difficult under ACA beginning in January 2011. ACA requires specific medical-loss ratios: For group plans, 80 cents of every premium dollar must be spent on medical expenses rather than administrative costs, while for individual plans, the ratio is higher—85 cents of every dollar. So what happens to those brokers’ commissions? Especially when, Berardo notes, brokers were pretty much guaranteed an
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Transcript of Managed Care Outlook
7/12/11 10:16 AMSelf-Funding: A Way to Save on Healthcare Costs
Page 1 of 2http://hr.blr.com/HR-news/Benefits-Leave/Healthcare-Insurance/Self-Funding-A-Way-to-Save-on-Healthcare-Costs/
HR and Employment Law News
Free Special ReportsGet Your FREE HR Management SpecialReport. Download Any One Of These FREESpecial Reports, Instantly!
Top 10 Best Practices in HR Managementfor 2011
5 Mistakes Everyone Makes with JobDescriptions and How to Avoid Them
Critical HR Recordkeeping
5 Tips for Creating HR Policies That WillHold Up in Court
7 Strategies for Effective Training
Win the Recruiting War
Beyond the Hype: Make Wellness Workfor Your Workplace
Featured SpecialReport
Claim Your Free Copy of Critical HRRecordkeeping
Employee recordretention is a dauntingtask for employersbecause there are somany differentrequirements based ona variety of criteria. Forexample, virtually everyfederal employmentlaw, ranging from theAmericans with
Disabilities Act to Title VII of the Civil RightsAct, stipulates certain record-retention rulesfor all private sector employers. In addition,many state and local jurisdictions impose
July 11, 2011Self-Funding: A Way to Save on Healthcare Costs
Many employers no doubt believe that being self-insured—collecting premiums and paying for employees’ healthcareexpenses from those funds—is only for big, deep-pocketorganizations. Joe Berardo, CEO of MagnaCare, believes itcan work well for companies with as few as 15 employees.
For a Limited Time receive a FREE HR Report on "Critical
HR Recordkeeping.” This comprehensive HR report covers
how employers can take critical document from a daunting
task to simple! Download Now
What’s changed for employers since the ACA? Our firstquestion for Berardo, whose company manages health plansfor employers in New York and New Jersey, dealt with theimpact of the Affordable Care Act (ACA) on such plans. In fact,he says, although the ACA has not yet done much of anythingto reduce healthcare costs, it does increase the benefits ofself-funding. There are two reasons for this: First, underhealthcare reform, plans can no longer cap medical benefitsbeyond a certain level. Self-insured companies faced with thisbarrier can call on stop-loss carriers, whereas the carriers forfully insured organizations absorb those losses—and thencharge the employer more the following year.
Second, most fully insured organizations pay brokers’ fees,which became very difficult under ACA beginning in January2011. ACA requires specific medical-loss ratios: For groupplans, 80 cents of every premium dollar must be spent onmedical expenses rather than administrative costs, while forindividual plans, the ratio is higher—85 cents of every dollar.So what happens to those brokers’ commissions? Especiallywhen, Berardo notes, brokers were pretty much guaranteed an
7/12/11 10:16 AMSelf-Funding: A Way to Save on Healthcare Costs
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Copyright © 2011 Business & Legal Reports, Inc. All rights reserved. 800-727-5257This document was published on http://HR.BLR.comDocument URL: http://hr.blr.com/HR-news/Benefits-Leave/Healthcare-Insurance/Self-Funding-A-Way-to-Save-on-Healthcare-Costs/
additional requirements.
This special report will discuss how HRmanagers can take critical document from adaunting task to simple!
Topics in this special report include:
• Hiring Records• Employment Relationships• Termination records• Litigation Issues and Electronic Information Issues• Tips for Better Recordkeeping• List of Legal Requirements
Download Now!
annual raise as healthcare costs went up every year. If thecommissions are part of the administrative component of thepremium, they eat into the profits of a fully insured plan.
There are more advantages to self-funding. One might callthose two ACA changes “sticks” in the sense that they goadcompanies to self-insure. But, Berardo advises, there are also“carrots” in the mix. Here’s a big one: In years when premiumsexceed medical costs for plan participants, the self-fundedorganization can keep the difference. By contrast, the carrierfor a fully insured plan would retain the extra funds asadditional profit.
Another big advantage, from Berardo’s point of view, is that the company managing aself-funded plan can gather patient-specific information and put it to work for effectivedisease management and wellness. A plan management company like MagnaCaretracks patients with chronic diseases to monitor their medication refills, periodic tests,and visits to their primary care providers.
Let’s say an employee is diabetic. He or she is reordering medication at theappropriate intervals but is not keeping up with blood-glucose testing. The planmanager contacts the employee’s primary care physician to alert the doctor that morefrequent testing is needed. Medical interventions like those can help keep patients outof hospitals and avoid further deterioration in their conditions. This method also keepsthe employer out of the loop, so that it avoids knowing about the private healthinformation of its employees.
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