By Bruce Roffé
When your clients’ renewals roll around, it’s only logical that you present them with options from a short list of conventional, fully-insured health plans – similar to their existing coverage.
However, depending upon your clients’ circumstances, a self-insured approach to providing health benefits, particularly one that benchmarks claims against Medicare rates, may be a better option for your clients. Moreover, your expertise on the subject can elevate your position to “trusted advisor” and earn you greater income in the process.
As a rule, self-funding health benefits delivers significant savings compared to premiums for a fully-insured health plan. In 2015, the average premium for employees and their families for those working at companies with a self-funded health plan was 31 percent cheaper compared to the average premium for those working at companies with a conventional, fully-funded commercial health plan, according to Kaiser Family Foundation research.
As your clients’ headcounts grow, they will likely turn toward a self-insured solution with or without your lead. However, you have a great deal of influence on how your clients approach the transition, and giving them the right advice can make you a hero to them.
The Basics Of Self-Funding Health Benefits
In a self-funded environment, the employer takes on the financial burden of paying workers’ health claims. A third-party administrator, or TPA, helps design a plan to meet the employer’s particular needs, including determining the cost-sharing between the employer and workers. The cost sharing mirrors fully-insured plans, usually in the form of monthly payroll deductions, copayments, and deductibles. The TPA contracts with provider networks and administers the claims.
To protect the employer from catastrophic costs associated with a major health expense or a particularly high number of aggregate claims, the employer also purchases stop-loss coverage.
In 2015, 63 percent of U.S. employers self-funded their health benefits, 10 percent more than only a decade earlier, according to the Kaiser Family Foundation. As you might expect, the frequency of self-funding increases with employee number. For example, 82 percent of employers with 500 or more workers self-insure, compared with 26 percent of employers with 100 to 499 workers, and less than 5 percent of employers with 50 or fewer workers.
What’s Good Enough For Uncle Sam…
Among your clients for whom self-insurance makes good sense, “reference-based pricing” or “Medicare-plus pricing” may be an even more attractive option. Medicare-plus plans are a relatively new option where employers typically pay the provider 1.2 to 2 times the rates set by Medicare. This can translate into tens of thousands of dollars of savings for your client – even compared to pre-negotiated rates for network providers. And that’s just for a single claim. Imagine the savings for a large group with hundreds or thousands of claims each year.
Employers can use the Medicare-plus approach for all claims, hospital claims only (and pay contracted rates through a preferred provider organization for physician services), or for specific services such as dialysis.
Here’s how it works. A worker accesses care, and the provider submits a bill to the TPA. The TPA, in turn, works with a medical claims cost-reduction company. The company determines the Medicare rate and re-prices the provider’s bill accordingly. Finally, the TPA pays the reduced amount.
Keep in mind, not all providers will accept the re-priced bill as payment in full. In these instances, the provider can pursue the unpaid balance from the worker. In some states, this collection approach, known as “balance billing,” soon may be illegal, but for now, it’s not uncommon. As a protection against the practice, many TPAs have patient advocacy plans where they agree to serve as advocates for the worker in these scenarios. In addition, they often will engage the medical claims cost-reduction company to negotiate an acceptable resolution for the provider, the employer and the worker.
Advisor, Salesperson Or Both?
Self-funded plans often make good sense for large groups. And for employers who have to provide coverage under the ACA but want to minimize costs, a Medicare-plus approach makes even smarter sense.
As an agent, you’re in an enviable position to advise your clients toward these options, and you can earn substantial revenue in the process. TPAs often pay commissions to agents, usually on a per employee/per month basis (PE/PM), and the amount can range from $1 to $2 per employee. For large groups, that translates into big dollars. In addition, stop-loss insurance carriers pay commissions.
In addition, many agents charge consulting fees, demonstrating the significant value employers place on their advice and counsel. For these agents, knowledge and a passion for saving their clients money makes them trusted advisors for years to come.
Dr. Bruce Roffé is a pharmacist and president and CEO of H.H.C. Group. Bruce may be reached at [email protected]
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