Groups defend small self-insured plans

Originally posted November 14, 2013 by Allison Bell on

Defenders of self-insured health plans testified on Capitol Hill today that the plans are tools for employers to get more control over benefits programs, not get-out-of-federal-health-regulation free cards.

The witnesses — including Robin Frick, a Madisonville, La., benefit plan administrator, who spoke on behalf of the National Association of Health Underwriters, and Michael Ferguson, the president of the Self-Insurance Institute of America, appeared at a hearing on self-insurance organized by the House Small Business Committee health subcommittee.

Some health policy watchers, including Linda Blumberg of the Urban Institute, who also testified at the hearing, have suggested that young, healthy small groups could use self-insurance simply to escape from Patient Protection and Affordable Care Act requirements, and that a flight toward self-insurance could destabilize the small-group health insurance market.

Frick told subcommittee members that most PPACA market protection rules will apply to self-insured groups as well as to insured groups.

"Further, some protections, like non-discrimination testing, already apply to all self-funded plans," Frick said, according to a written version of his remarks posted on the committee website.

The U.S. Department of Health and Human Services is giving more flexibility to insured plans in some areas, such as employee participation requirements, than to self-insured plans, Frick said.

Ferguson gave a list of some of the many PPACA rules that apply to non-grandfathered self-insured plans, including the ban on annual and lifetime benefits limits, preventive services coverage requirements, benefits summary requirements, disclosure requirements, external claim denial review requirements, limits on waiting periods, and an emergency services coverage mandate.

Many of the PPACA provisions that exempt self-insured groups, such as PPACA health insurance rate rules, are irrelevant to self-insured groups, because the self-insured plan sponsors already have an obvious incentive to try to hold down administrative costs, Ferguson said.

Self-insured win partial PPACA fee exemption

Originally posted October 28, 2013 by Dan Cook on

Self-insured employers and self-administered health plans are about to catch a break, thanks to fine-tuning of the Patient Protection and Affordable Care Act by the Department of Health and Human Services.

In a soon-to-be-published compendium of rule modifications, HHS says it will exempt certain self-insured employers from the second two years of paying the reinsurance fee.

HHS says the proposed modifications — of which there are quite a few — are the result of its “listening” sessions with interested parties about specific requirements of the act. The full list can be found in the proposal, “Program Integrity: Exchange, Premium Stabilization Programs, and Market Standards; Amendments to the HHS Notice of Benefit and Payment Parameters for 2014.”

HHS doesn’t offer a whole of detail on the exemption matter. It says in order to address employer feedback that the fees are burdensome, it will accept payment of the fee in two chunks instead of one (at the beginning of 2014 and at the end of the year) and will “exempt certain self-insured, self-administered plans from the requirement to make reinsurance contributions for the 2015 and 2016 benefit years” in future rulemaking and/or guidance proposals.

However, all employers will be required to pay the first-year fee for the program, which begins in 2014.

The 2014 fee for the three-year Transitional Reinsurance Program was set at $63 per plan participant. Fee levels have not been set for 2015 and 2016.

The fees are designed to yield $25 billion over the three-year program – money that would help offset costs incurred by insurers covering high-cost individuals purchasing coverage in public insurance exchanges.

HHS’s missive addressed other matters, including what happens when a small company buys small group insurance, and then it becomes a large company. The employer can keep the small group insurance package as long as it doesn’t make substantial modifications to it. But if discontinues small group coverage, it will then have to purchase insurance through the large group exchanges.

HHS also promised to provide further guidance on the sticky issue of what constitutes a fulltime employee for purposes of the all-important employee head count.

The proposals are scheduled to be published in the Federal Register on Wednesday.

Cost savings attributed to self-funding, wellness

Originally published September 6, 2013 by Tristan Lejeune on

Dianne Howard has understandably made a number of changes during her tenure as director of risk and benefits management with the School District of Palm Beach County, Fla. - after all, she's been there for 18 years. One change in particular six years ago paved the way for many other beneficial ones: The district went self-funded. It's a shift that may not be an option for many employers, but Howard - winner of the 2013 Benny Award for Benefits Leadership in Health Care - says it allowed her to be more hands-on with internal policies and institute real, lasting improvements.

"I'm a big believer in self-insurance," Howard says. "I think you can buy excess insurance to protect yourself, you know, specific and aggregate. You can't be too small, but for groups of 1,000 or more, it's the way to go. You can control things, you can subcontract, you can get in there and say, 'Well, why is this costing us so much money?'"

She recalls an incident where MRIs - hundreds of them in total - were being paid for without having the deductible applied. Providers never informed them of this until the district took the reins themselves; they had just assumed that hospital stays were involved.

"And it was just a mistake - I'm not trying to throw anybody under the bus - but because we looked at it, we could fix it and change it so that the design as we negotiated [it] was in there, and we're getting the savings that we thought we would get," she says.

After going self-insured, the district used a data warehouse to analyze its claims and find ways to control costs. Estimated savings? At least $4 million. It also added a tobacco surcharge to insurance plans and helped write the Florida law banning smoking on school property. But the initiative Howard is most eager to talk about is one that has been widely embraced even as its financial efficacy has been increasingly questioned: wellness.

Not an easy sell

Many who have tried it will tell you that initiating a wellness program is not the easiest sell to an employee population. Just ask Howard: "People don't like being told what to do," she says, and she saw quite a bit of resistance. That's normal enough for a private company, but Howard's position comes with extra challenges.

"We're a public entity, so noise gathers," she says. "It doesn't just come to me and my staff. It goes to me, to my boss and maybe to our school board. You just want to be able to defend your position, get it well-communicated and get the unions on board to help you communicate. We told them, 'If it works and we keep our rates down, maybe we won't need rate increases every year.' And for 2014, we're not going to need a rate increase."

Marilyn Boursiquot, benefits manager for the district, agrees that wellness was not exactly a welcome change for employees, but she says the work is paying off.

"Our culture is slow, and some folks are still being dragged along kicking and screaming, but we can truly say that we're starting to see the light of creating a culture of wellness, which is really exciting," Boursiqout says.

Howard's "tenacity" and her "willingness to be on the edge" has helped steward the district through year after year of change, Boursiquot says. And she thinks that's what makes Howard worthy of her Benny Award.

"When we look at other school districts, and just other employers in general, they're willing to go to a point, but then when the rubber hits the road ... it's not always easy to introduce programs like this," Boursiquot says. "You take flak for it. And to actually keep moving forward in spite of all that - that's what I really admire about her."

Medical trends

The School District of Palm Beach County boasts an average five-year medical trend of 6% - 4% below the industry median of 10%. It also shed 1,000 dependents (estimated long-term savings: $4.4 million) after an audit found them ineligible - one of many reviews made possible through self-insurance.

Howard, however, believes the wellness program has been helping keep costs down for the district, which has 20,000 full-time employees. It was a slow road, she says, and the program "evolved" from weak to strong.

"We started out by saying, 'Here's a health assessment you could do.' In a district our size, we got 25 people to do it, and we gave gift cards at the time," she says. "And that really was poor. So about four or five years ago, we started talking with the unions, and we found a different way to negotiate with them and said, 'Let's bargain something two years out,' and that gave them time to think and to plan.

"We wanted to get to the point where employees have to get blood work, so they know their condition, and get a physical. ... More than half our employees never saw a doctor. So we said, 'OK, preventive stuff is what we should do,' so we had talks with our carrier about what's important, and we figured the health assessment was very important."

The district upped the reward for HRA completion substantially to a $50 premium reduction per month. "And that number," Howard says, "really was motivating to our employees." In its first year, the new program saw 85% compliance. And now, as she says, health insurance costs won't rise for workers next year. This, too, is a bigger deal for a public entity.

"We're government employees," Howard points out. "We haven't had raises in a few years."

Of course, even wellness programs' biggest proponents will admit they can only get you so far; the district has had to do its share of belt-tightening. Copays and premiums have risen in recent years, and there are newly designed pharmacy tiers, too.

Estimating in 2010 that diabetes accounted for 20% of its health claims, the district implemented a diabetes health plan. In its first year, the plan reduced total net costs by 9%, or around $2.9 million.

In another "self-funded only" gain, the district now gets 100% of its pharmacy rebates, which not only helps its coffers but also future plan design.

"Our rebates are approaching $5 million a year, and that's money that goes right back into the health plan," Howard says. "We had no idea it was so much money - only self-insured employers do."

Schools run mini-programs

But Howard again credits the district's wellness plans for starting long-term change. Schools, she says, can be excellent incubators for mini-programs that could work just as well at businesses with multiple locations. In addition to administrative offices, the Palm Beach County district runs some 180 locations, serving approximately 176,000 students.

"We had what we called 'wellness champions' at each school," Howard says. "What we said we would do is give them some resources so that they could run a program for their school - if they wanted to run a class on exercise or Weight Watchers or whatever. We have two big meetings a year with them, we give them a $500 stipend out of our health budget and for that they have to do a certain number of programs at their school. ... We went from 30 to 170 [wellness champions] in four years. And each of those people can [reach out] to the 200 to 400 people at their school and they know them."

Employees might be more amenable to such programs when they're initiated by a friendly co-worker and not some distant HR office. Making it personal and fun helps, too: In a different effort, called the Apple-a-Day Program, participants can submit photos of themselves eating apples while walking, reading medical care info or doing other healthy things. Howard says vendors donated prizes for the best photos, and local orchards even donated some apples. It's definitely a program she plans to repeat.

Kimberly Sandmaier, Palm Beach County wellness coordinator, admires Howard for her dedication and knows the district health plan is in good hands. "She's worked so hard with all our programs," Sandmaier says, and positive results are coming in on all fronts.

"I've always looked up to her and seen her as a leader. Whether it's meeting with a vendor or the unions, she gets a lot of respect from them. I think she does a great job, and she handles everything with grace."

As for what lies ahead, Sandmaier says, "We're trying to be proactive. We're trying to figure out the best thing out there to reduce our health care costs, especially in light of everything that's happening with health care reform and some of the additional charges that we may see in the future."

In the next phase of evolution, Howard plans to make her wellness programs results-based. Though she concedes it "may be not quite as successful," she remains optimistic.

"I think people are going to do it. I mean, you're taking the blood work anyways," she says. "Ideally people will say 'I've been doing the blood work for three years, I've had high blood pressure for three years - why don't I do something about it?' But that might not happen."

Whether self-insured or not, whether public or private, Howard recommends employers commit to wellness. "I really believe that you need a wellness component and work toward having your population having a little accountability in your health care," Howard says. "Don't give up when the noise gets a little loud. Use your data to show people, 'Look, this is what happening.' I just really believe in it; it's been good for us."

The numbers

Here are just a few of the results achieved by the School District of Palm Beach County under Dianne Howard's leadership:

2007: Switch to self-funded plan.

0: Cost increase in 2014 for self-funded medical plan.

6%: Average five-year medical trend.

100: Percentage of pharmacy rebates now received.

$4 million: Savings achieved from using a data warehouse to dig into claims to see where the school district was spending the most money and analyze what could be done to control those costs.

1,000: Number of dependents moved off the health plan thanks to a dependent eligibility audit.

$4.4 million: Estimated savings from dependent eligibility audit.

80%: Average participation rate in the wellness program.

$2.9 million: Estimated savings from the implementation of a diabetes health management program.

$600: Annual tobacco surcharge.

195: Number of wellness champions, up from 16 a few years ago.

Should exchanges be part of your company's plan?

Originally posted August 06, 2013 by Justyn Harkin on

Although considering the new health care exchanges may have seemed radical a few weeks ago, now that everybody gets to drop ten and punton the employer mandate penalty in 2014, the idea may not be so strange.

Sure, migrating employees to the exchanges isn’t right for every organization. If the move would upset your workforce, then keeping your current group plan is probably best. But if employees would view exchange offerings as equal or better than what they current have, then there could be plenty of upsides.

If you think the exchanges would be better than what you have now for both your company and your employees, or even if you just want to get a leg up on communications (and believe me, that’s never a bad idea), then you and your employees have three options — public exchanges, private exchanges (fully insured), private exchanges (self-insured).

Which one might be best for your organization? Let's see.

Public exchanges

One of the most attractive ideas about moving to a public exchange has to be handing over the considerable financial and administrative burdens for running your company’s health benefits.

For some organizations, the move might be cheaper than what they are doing now. Even when you factor in the likely, eventual activation of the $2,000-per-employee fine for not providing insurance, you could still be paying less than what you would if you were covering premiums.

Of course, sending employees to public exchanges isn’t necessarily a slam-dunk move. Your workforce could straight-up riot if you tell them you’re cutting health benefits, and even if you raise salaries (oh, hello there, higher payroll taxes) to help them cover the costs of buying their own insurance, your recruiting efforts could take a hit if your competitors keep their health benefits.

Private exchanges with fully insured plans

Perhaps the biggest advantage of using a private exchange is the ability to shift some of the rising costs of health care to employees and give them the ability to control their spending.

In a private exchange, employees get an allowance from their employer that can be used to buy insurance. The idea is that giving employees control of the purchasing decision takes some of the heat off of your company. After all, if the cost of health care rises, that’s not your fault?

So what’s the downside to this type of exchange? Well, in the worse-case scenario it’s a less healthy, less productive workforce. Because employees will be making purchasing decisions, they may choose lower premiums over better coverage, and that can contribute to poorer health and higher rates of absenteeism.

Private exchanges with self-insured plans

The last of your exchange options are private exchanges with self-insured plans. Compared with the types of plans offered on public exchanges and private exchanges with fully insured plans, the plans available on private exchanges with self-insured plans can seem very attractive employees — generally lower premiums, more generous plan features, and more in-network doctors — but they will be more expensive.

The self-insured private exchange option might be slightly more expensive than what you could do with a fully insured private exchange, that’s true, but the available plans would be more oriented toward long-term health.

Still, using self-insured plans means you’ll have to assume all the risk and pay for all your employees’ claims. Also your employees will become customers of the private exchange insurance companies, and that means you won’t have the same influence (over the companies or choices) that you would otherwise have.

How will you spend the bonus year?

Assistant Secretary for Tax Policy Mark J. Mazur’s July 3 announcement might have seemed like the best health care reform–related thing to happen to employers all year.

If you take the “transition year” at face value, meaning the mandatory employer and insurer reporting requirements are being postponed, then you have the perfect chance to carefully consider your company’s next moves.

Maybe you’ll decide to take the plunge. Perhaps you’ll rule out the exchanges altogether. You might even decide to let other companies test the waters first so you can be prepared later on.

No matter what path you chose, though, the most important thing is taking the time to make the best decision for your company and your employees. And then communicate that decision in a clear and engaging way. Good luck!

Employers Sample New Ideas to Chop Costs

Self-insured employers increasingly are testing new plan designs and tougher negotiation tactics with providers in hopes of discovering new and better ways to tamp down health care costs.

For instance, companies are beginning to adopt the "value-based" model in hopes of keeping small health issues from swelling into major catastrophes.

In a recent online post by SmartHR Manager, Gary Rost, executive director of the Savannah Business Group, noted that self-insured companies that want to shift to a value-based plan -- in which treatments and procedures are analyzed with effectiveness and cost in mind -- must tackle three major tasks:

1.    Find and purchase from the high-performing medical provider in their area

2.    Design a benefit that will steer their employees to that provider

3.    Emphasize preventive care so chronic conditions do not become costly

The first step for employers, Rost said, is to examine their current plan and determine areas of failure. Once data are gathered on who is using what services (and how they're using them), employers can work on building the best network and designing incentives that will guide workers to providers who understand the value-based philosophy and will deliver the best care at the best price.

Beyond the plan design, self-insured employers can take a number of other steps to make their health plan better, according to Karrie Andes, a senior benefits manager for PGi. In a recent article for Employee Benefit News, Andes offers a number of tips to help self-funded companies secure the best plan, including:

  • Try to negotiate rates upfront for two or three years
  • Be aware of any limits on claim audits
  • Explore savings by carving out disease management, pharmacy benefits and other features
  • Look for a transparent pharmacy model, which allows the pharmacy benefit manager to pass full rebates to your company


Although managing a self-funded plan can be a challenge, the concept has its benefits, according to a recent report by Kaiser Health News. Self-funding can offer significant savings for companies by reducing administrative costs and allowing them to offer a single plan across state lines, the report noted.

While the self-funded model is not for every company, the number of larger employers that have opted to self-insure has grown significantly over the past decade. According to data from the Employee Benefit Research Institute in the KHN report, 68.5 percent of employers with 50 or more workers were self-insured in 2011, compared with 57.8 percent in 2001. However, the number of smaller employers (fewer than 50 workers) who opt for self-funding actually dipped during that time period (10.8 percent in 2011, compared with 12 percent in 2001).


Companies are seeking alternate health coverage offerings in the face of a shaky economy and the potential impact of the health care reform law, according to a new report by J.D. Power and Associates. The study found that employers are considering such options as defined contributions, vouchers and exchange purchasing in an effort to control spiraling health care costs. Employers, however, seem committed overall to continuing to offer health benefits. The study found that only 13 percent of fully insured employers and 14 percent of self-insured companies said they probably or definitely will not offer employer-sponsored benefits in the future.