John Hickman was a featured presenter during this webinar sponsored by AIS Health. Various market and regulatory forces are driving a wave of small employers to shift to self-funded insurance coverage — a tactic once reserved for only the largest businesses. For health insurers, a significant migration of small employers to self-funded coverage could quickly erode premiums and profits. It also could lead to adverse selection in the full-risk pool if those self-insuring employers have generally healthy worker populations. While a fully insured member is worth about five times the operating profit of a self-insured member, fewer risk-based clients might also translate to larger operating margins. The webinar covered the pluses and minuses for insurers and employers … as this growing trend in health insurance gains even greater momentum. This program also provided insight on how insurers, employers and regulators are reacting.
Self-insured plans are subject to fewer regulatory requirements under the reform law. And while self-funding also offers greater plan-design flexibility and cost savings for employers, it comes with serious financial risk as well as a host of ERISA-related rules. For health insurers, self-funding could reduce per-member operating profit. Although administrative services only (ASO) members might be less profitable on the surface, returns on capital can be very high. There also is less financial risk and uncertainty associated with members covered by a self-insured employer. And that could create new plan-design opportunities for health insurers. The following topics were discussed during the program.
- Why health insurers should limit the size of employers they are willing to cover on a self-insured basis.
- What the opportunities are for health plans in this space.
- How health plans can determine an employer’s ability to pay its own medical bills.
- What types of businesses should consider self-funding and which ones are not good targets.
- How employers should weigh the risks, benefits and costs associated with stop-loss insurance coverage.
- Why some state regulators want HHS to amend its model stop-loss coverage law to prohibit the sale to small employers.
- Why certain provisions of the reform law, such as the new rating bands and essential benefits, will make self-funding even more attractive for some employers.
- How the elimination of annual and lifetime maximums, as required under the reform law, will increase claim variability and could result in higher premiums for stop-loss coverage.
- How lower premium taxes could mean big savings for employers that self-fund.