News
     Sep 30, 2009 CDHP adoption rate rose among big employers, despite the economy
     Sep 16, 2009 Employees like their health plans, despite gaps in understanding
     Sep 10, 2009 Obama proposes controversial employer mandate, public option
     Sep 1, 2009 Hospital cracks down on ER visits
     Aug 20, 2009 COBRA enrollment soars, reports Hewitt
     Aug 11, 2009 NY law seen as harbinger of more state health reform
     Aug 4, 2009 Near-term health trends familiar, irrespective of reform
     Jul 21, 2009 Employers lukewarm on public-plan option, survey shows
     Jul 17, 2009 House committee approves health reform bill
     Jul 15, 2009 Senate committee passes health reform bill
     Jul 7, 2009 ‘Pay or play’ not as painful as originally thought
     Jul 1, 2009 Five costly conditions to watch
     Jun 30, 2009 Americans go online for health information
     Jun 23, 2009 Pennsylvania passes mini-COBRA law
     Jun 16, 2009 Health benefits taxation takes center stage
     Jun 8, 2009 Obama alters stance on health reform proposals
     May 28, 2009 Mail trail shows health insurers readying for reform
     May 19, 2009 Health care costs hit women harder
     May 7, 2009 To see a doctor, get in line
     May 1, 2009 Considering the exit ramp: Employers rethink offering health benefits
     Apr 23, 2009 Hard times tighten ‘use-it-or-loss-it’ bond to health benefits
     Apr 13, 2009 COBRA subsidy expected to be costly
     Apr 6, 2009 Workplace wellness bill reintroduced with greater support
     Mar 24, 2009 New COBRA model notices released
     Mar 10, 2009 Twelve ways to slash medical bills
     Mar 1, 2009 Self-insuring is a way for employers to get 'a whole lotta cannoli'
     Feb 23, 2009 Employers turn to eligibility audits, voluntary benefits to control health care costs
     Feb 11, 2009 Senate, House debate COBRA subsidy
     Feb 3, 2009 Dems optimistic on comprehensive health reform
     Feb 1, 2009 How's this for an incentive? You get to keep your health insurance
     Jan 27, 2009 Medicare reimbursement shakes things up
     Jan 20, 2009 Health benefit costs continue to rise, survey shows
     Jan 13, 2009 N.Y. proposes policy requiring employers to extend dependent coverage
     Jan 1, 2009 Health care reform to take center stage this year
     Dec 16, 2008 Employees cut back on health costs - for better or worse
     Dec 1, 2008 Moderating health care costs could signal trouble ahead
     Nov 25, 2008 Tobacco addiction costs employers $167.5 billion a year
     Nov 18, 2008 Benefits professionals favor drastically reworked employer-based systems in new administration
     Nov 11, 2008 Employers urged to flex muscle on health care reform
     Nov 4, 2008 Obesity epidemic remains a battle
     Nov 1, 2008 Evidence shows positive outcomes from greater investment in primary care
     Oct 21, 2008 Losing sight of wellness program goals
     Oct 14, 2008 DOL seeks comments on how health plans use genetic data
     Oct 1, 2008 More patients heading to the emergency room
     Sep 23, 2008 BFE: Up your FMLA ante with these helpful tips
     Sep 15, 2008 Companies combat high HMO premiums with aggressive strategies
     Sep 8, 2008 Steady support for wellness and disease management
     Sep 1, 2008 Chronic conditions afflict more than half of Americans
     Aug 12, 2008 HHS wants wellness program advice
     Aug 1, 2008 Attention all shoppers: How to be a smart PBM shopper
     Jul 15, 2008 Parties stand far apart on health care reform
     Jul 10, 2008 Benefits to protect— and add— during economic downturns
     Jul 1, 2008 Seven Self-Insurance Myths
     Jun 24, 2008 Growth of employer medical costs projected to accelerate
     Jun 15, 2008 Pushing the envelope: Zero tolerance on tobacco use
     Jun 1, 2008 A new direction for health care reform and HMOs
     May 27, 2008 What's next for health care reform?
     May 20, 2008 Ohio, W.Va. and Pa. say no to CDHPs, survey reports
     May 6, 2008 Health plan study shows performance varies region to region
     May 1, 2008 Benefits finance: Is a self-insured health plan right for your company?
     Apr 29, 2008 HHS Secretary Leavitt backs value-based health care
     Apr 22, 2008 Obesity costs employers $45 billion a year
     Apr 10, 2008 Want to reduce sick days by an average of 41%? The solution is easy. Just walk.
     Apr 1, 2008 Robust incentives may improve retention rates in wellness programs
     Mar 25, 2008 Mercer Report: Employers focus on generic and specialty drugs to reduce Rx costs
     Mar 11, 2008 How to make your PBM more accountable
     Mar 6, 2008 Americans alarmed by gaps in quality health care delivery
     Feb 21, 2008 PBMI launches career center for drug benefit industry
     Feb 12, 2008 Business group wants to reduce health disparities among minorities
     Feb 5, 2008 Using incentives for health risk appraisals
     Jan 31, 2008 Mid-size employer turns to "hybrid" CDHP model
     Jan 15, 2008 Employees take advantage of wellness resources - when they're available
     Jan 8, 2008 Consumers are in the dark on health insurance terminology
     Jan 1, 2008 Checking the label: Transparency, generics utilization key components to effective PBM relationship
     Dec 18, 2007 Group counters belief that benefits sky is falling
     Dec 4, 2007 Touting large-scale ideas for health reform
     Nov 20, 2007 Health benefit costs still outpace the rate of inflation
     Nov 8, 2007 Toolkit outlines best practices in health coverage for mothers, children and adolescents
     Nov 1, 2007 Communications, wellness prove challenging for HR
     Oct 15, 2007 HealthMarkets charged with misleading customers and denying required care
     Oct 4, 2007 Is your company prepared for a pandemic?
     Sep 25, 2007 Focus on health plan design paying off for employers
     Sep 15, 2007 iPhone puts consumers' health records in the palm of hand
     Aug 23, 2007 Health insurers are starting to focus on value-driven plans
     Aug 9, 2007 California to produce first PPO report card
     Aug 1, 2007 Chicago museum makes walking exhibit grounds cornerstone of successful, no-frills wellness program
     Jul 24, 2007 Health care costs top employer concerns
     Jul 12, 2007 Benefit professionals react to Moore's depiction of health care
     Jul 1, 2007 Creating wellness incentives that resonate with workers
     Jun 21, 2007 Health insurance inflation is slowing down
     Jun 15, 2007 On the contrary: Employers not looking to shift costs
     Jun 1, 2007 Can't we all just get along? Achieving successful benefits integration with multiple carriers
     May 17, 2007 Employers shift focus to prevention
     May 17, 2005 Employers shift focus to prevention
     May 8, 2007 Fortune 500 firms push for health reform
     May 2, 2007 Biotech drug costs skyrocket
     Apr 26, 2007 Experts help small firms with health plans
     Apr 18, 2007 Group says health premium jumps should be justified
     Apr 5, 2007 HMOs more cost-effective in California
     Mar 20, 2007 CVS buys Caremark
     Mar 6, 2007 Americans value e-health services
     Feb 22, 2007 Top-rated hospitals have lower mortality rates
     Feb 5, 2007 Participation in wellness programs grows
     Jan 25, 2007 Country reacts to Bush health care proposal
     Jan 16, 2007 FMLA ruling protects subsidiaries
     Jan 10, 2007 Latest CDH trend may be plan attrition
     Jan 3, 2007 Tool helps employers keep up with the "Joneses"
     Dec 20, 2006 Majority unaware of medical costs
     Dec 13, 2006 Bill makes HSAs more flexible
     Dec 5, 2006 Half of CDHP users would switch plans if possible
     Dec 1, 2006 Health inflation lower, but worries grow over "fraying benefits"
     Nov 30, 2006 NBGH launches free guide to preventive care
     Nov 16, 2006 Medical costs may show double-digit increase in 2007
     Nov 7, 2006 Most workers do not use FSAs
     Oct 25, 2006 PBMs keeping up with Wal-Mart
     Oct 17, 2006 Consumers prefer generics to brand drugs
     Oct 11, 2006 Workers worried about future of health benefits
     Oct 1, 2006 Dental providers embark on new ways to offer benefits
     Sep 20, 2006 Questions remain about provider quality programs
     Sep 15, 2006 Cheaper Zocor throws generic market a curveball
     Sep 6, 2006 HSA assets surge over past six months
     Sep 1, 2006 Consumers get more tools to gauge medical costs, quality
     Aug 31, 2006 Workers motivated by richer benefits
     Aug 24, 2006 Bush compels price and quality transparency in health care
     Aug 17, 2006 Workers uneasy about pay, health care
     Aug 9, 2006 HMOs account for one quarter of insurance market
     Aug 1, 2006 Generics influx drags prescription drug trend to seven-year low
     Jul 25, 2006 Depression costs related to health care access
     Jul 12, 2006 Research shows effects of quality ratings for surgeons
     Jul 6, 2006 Employers portend scaling back retiree medical benefits
     Jun 20, 2006 Tips for CDHP roll-outs
     Jun 15, 2006 Ohioans recoup $6.5 million in health claims
     Jun 8, 2006 Not-so-great expectations for health costs
     Jun 1, 2006 Vermont latest state to pass health reform
     May 30, 2006 Study gauges health data gap
     May 17, 2006 Most employers do not offer DM, wellness, but they want to
     May 10, 2006 Declining employer-sponsored health plans documented
     Apr 27, 2006 Workers build muscle with incentives
     Apr 25, 2006 Change coverage to lower pregnancy cost
     Apr 20, 2006 Health experts face off on access vs. innovation
     Apr 15, 2005 Target draws bead on consumer-driven health care
     Apr 11, 2006 Female employers worry about skyrocketing health costs
     Apr 5, 2006 Mental health benefits add value, not cost
     Mar 27, 2006 Validate your health ROI to the CFO
     Mar 21, 2006 Variety of strategies needed to curb health costs
     Mar 9, 2006 Managers doubt CDH will make workers healthier
     Mar 1, 2006 Health care to account for 20% of GDP by 2015
     Feb 23, 2006 Higher co-pay differentials increase generic fill rates
     Feb 14, 2006 Consumer advocates worry about health data privacy
     Feb 7, 2006 Cost and talent issues challenge benefit professionals
     Jan 25, 2006 More than half of seniors stay away from Part D
     Jan 15, 2006 Mind the Meds: Top 10 pharmacy benefits management strategies for 2006
     Jan 2, 2006 Put your health care eggs in many baskets
     Dec 14, 2005 CDH participants dissatisfied but frugal
     Dec 8, 2005 Health care banking gets the Blues
     Dec 1, 2005 Generic drugs offer employers untapped savings
     Nov 29, 2005 Care management, cost-shifting reduce health costs
     Nov 17, 2005 Pay-for-performance generates quality improvements
     Nov 15, 2005 Employers should examine full impact of obesity
     Nov 3, 2005 US CEOs more health care cost conscious
     Nov 1, 2005 Health cost relief takes center stage at BMF&E
     Oct 25, 2005 Wal-Mart extends lower-cost health insurance
     Oct 11, 2005 Large companies find lower health care hikes since 1999
     Sep 21, 2005 Cost-shift trend is also costing brokers
     Sep 15, 2005 Financial incentives touted as health care cost fix
     Sep 8, 2005 PBM mail-order pharmacies deliver cheaper drugs
     Aug 31, 2005 A spoonful of compliance helps health costs go down
     Aug 18, 2005 AutoNation claims UnitedHealthcare overpaid by $10 million
     Aug 16, 2005 Consumers elevate HMOs over PPOs
     Aug 9, 2005 Medical cost containment depends on changing habits
     Aug 2, 2005 Employers could see relief in benefit costs
     Jul 26, 2005 PBMs scoop up specialty pharmacies
     Jul 15, 2005 Off and running: Self-funded employers may have head start in push for wellness
     Jul 5, 2005 Walgreens says drug costs rose 7.2% in 2004
     Jun 28, 2005 More than half of employers concerned about wellness
     Jan 21, 2005 Benefit managers offer best ways to ease health costs
     Jun 14, 2005 UnitedHealth has a million in consumer-driven plans
     Jun 9, 2005 Uninsured worsen medical inflation for workers
     Jun 1, 2005 New study puts medical costs into focus
     May 24, 2005 Disease management has become the norm
     May 10, 2005 Unions found to have better access to health insurance
     May 4, 2005 Employers don't lie down for higher premiums
     Apr 28, 2005 Mandatory health insurance rejected in California
     Apr 21, 2005 GM says health costs partly to blame for first-quarter losses
     Apr 12, 2005 Group launches program to buy health insurance in bulk
     Apr 7, 2005 Maryland considers bill that mandates benefits spending
     Mar 25, 2005 Many would sacrifice choice for lower health costs
     Mar 15, 2005 State health mandates scrutinized
     Feb 9, 2005 Scandals may prompt more online insurance bidding
     Jan 19, 2005 Employers should investigate disease management math crimes
     Jan 12, 2005 Clients tackle medical inflation roots
     Jan 8, 2005 Employees prefer work-based insurance
     Dec 21, 2004 Automated Systems For Drugs Examined
     Dec 14, 2004 Companies Rapidly Cutting Health Benefits
     Dec 2, 2004 40 Percent in U.S. Use Prescription Drugs
     Nov 1, 2004 Your New Health Plan
     Sep 27, 2004 Health costs rising faster than incomes, study says
     Sep 13, 2004 Employers slow shift of health care cost burden to workers
     Aug 10, 2004 Health care costs employers more than paid leave
     Jul 15, 2004 Health insurers lost $85 billion to fraud last year
     Jul 22, 2004 Health and productivity management intrigues firms
     Jun 4, 2004 Rising benefit costs hurt small businesses' financial health
     Feb 28, 2004 Strike-weary grocery workers eye new offer
     Feb 28, 2004 Experts ponder limitations of cost-sharing
Seven Self-Insurance Myths

Fifty-five percent of the employers in the United States with more than 200 employees partially or completely self-fund their health plans. Yet despite the prevalence of self-insured plans, there is still misinformation about them.

Myth #1: Self-funding is too risky for small employers.

Self-insurance is not widespread among small employers; just 12% of those with 3 to 199 employees self-fund their health plans, according to the 2007 Kaiser Family Foundation Survey of Employer Health Plans. That's a shame, some experts say.

"The myth that small businesses should not self-insure may be the biggest one of all," says Carl Mowrey of SMART Business Advisory and Consulting LLC, a benefits and compensation firm.

"If you have 750 or more employees, self-insuring with stop-loss coverage is a slam-dunk, unless there are extenuating issues. However, I've had employers as small as 50 people self-insure. You have to look at your demographics and the health of your workers to determine the kinds of risks you'll be taking and design a plan that will protect you," he says.

"The conventional wisdom among agents and brokers is that you need at least 200 employees to self-insure," says Curtis Donley, president of Donley & Company, Inc., a third-party administrator and plan consulting firm. "I've also heard that self-insuring with fewer than 100 employees is pushing the envelope. We've found just the opposite - self-insuring is an extremely viable alternative for small groups. We routinely self-fund groups of 25 and up. Self-funding helps small employers gain the flexibility that only the larger employers get in the fully-insured market."

Of course, small employers must find a stop-loss insurer that will take on the risk they're unwilling or unable to assume. That wasn't always easy in the past.

"In recent years, however, the stop-loss market has opened up to small groups. I know of two that will go as low as 15 lives," Donley says.

Myth #2: Self-funding makes health care costs too unpredictable.

With a fully insured plan, employers know what they must pay over a specified time period. With self-insurance, claims, and costs, go up and down from year to year, which can make budgeting difficult. A self-insured employer therefore must have the financial resources, or cash flow, to meet its obligations.

"For most self-funded groups, 60% to 70% of the cost of the program is claims, and claims are extremely volatile," says Donley. "Most employers just pay claims out of their general assets. We set up VEBA trusts for smaller groups that let them hold reserves in good years so they can draw down when claims are higher. This smoothes out their experience."

"With fully funded insurance, you're paying for the carrier's marketing, their risks charge and also [a] hefty amount for profit," observes Mowrey. "I've heard self-insurance described as a not-for-profit health plan. You may often save 10% to15% off what [you] otherwise would pay."

Myth #3: If you have a fully insured plan, and it's running well, you will save money by self-funding.

Maybe not, especially if you're a small or midsize organization and you want to stay with the same carrier.

Because insurers typically make their biggest underwriting profits in the middle market, carriers usually aren't eager to switch fully-funded clients to a self-funded plan, explains Robert M. DiMase, vice president of finance and treasurer with Sentinel Financial Group, a financial services and benefits firm. "So they often will quote unattractive self-insurance rates to those with 50 to 500 lives," he says.

DiMase advises shopping around; competing carriers may offer a better price. But if you want to stay with the same provider network, it might be smartest to stay with your fully funded plan.

Myth #4: Self-funded plans are more restrictive than fully insured plans.

In fact, the Employee Retirement Income Security Act of 1974 exempts self-funded plans from state insurance laws, including reserve requirements, mandated benefits, premium taxes, and consumer protection regulations. Employers that self insure do have to comply with federal laws, including ERISA, the Health Insurance Portability and Accountability Act, Consolidated Omnibus Budget Reconciliation Act, the Americans with Disabilities Act, the Pregnancy Discrimination Act, the Age Discrimination in Employment Act, the Civil Rights Act and various budget reconciliation acts, such as the Tax Equity and Fiscal Responsibility Act, Deficit Reduction Act and Economic Recovery Tax Act.

"With self-insurance, you have a lot more freedom to design a plan that is not subject to state mandates [requiring certain benefits]," says Mowrey. "I did a study for one employer that showed state mandates added about 10% to the cost of a fully funded versus a self-insured plan. While you may want to have some mandated benefits, you don't necessarily need them all. When you're self-insured, you can pick and choose."

DiMase estimates that state mandates add 5% to 7% to a carrier's premium.

"You have to understand what benefits you are cutting out to save that premium, though," he cautions. "It may be that you still want to offer mandated benefits to be a competitive employer."

Because an employer makes its own decisions on what benefits to include, it can move more quickly to take advantage of new, cost-saving opportunities, such as medical tourism, suggests Rudy Rupak, president and founder of Planet Hospital, an international PPO network with providers in 13 countries.

"It's a myth that medical tourism isn't for self-insured employers," he says, adding that non-U.S. doctors offer high-quality, lower-priced services, are often trained in this country and carry malpractice insurance.

Myth #5: Health benefits available in self-funded plans are not as good as those in fully insured plans.

The quality of benefits in self-funded plans is not inferior and may even be better, self-insurance advocates maintain. Major insurers provide the same network to self-insured clients as to insured.

"We put in a lot of self-insured plans where benefits are much richer than typical insurance plans," says Mowrey.

"We combine these benefits with more aggressive features to keep the cost down, such as strong disease management and wellness programs that you may not see in the fully insured environment."

"When we set up a self-funded program," says Donley, "we typically see a dramatic increase in employee satisfaction. There are fewer complaints and issues. Most employers would pay a little more to improve employee satisfaction with their plan."

Myth #6: When you are self-insured, your insurance carrier has to guarantee your renewal.

If you believe this, you may be in for a rude - and expensive - awakening.

"We've seen where a self-insured company's claims experience was so poor that they weren't offered a renewal," says DiMase. "Needless to say, when you're in that position, the alternatives aren't very attractive."

"You need to know that this is a risk going in and ask your carrier if there is a guaranteed renewability feature in the self-insurance contract," he adds.

Myth #7: Self-insurance puts the burden on the employer.

There is a perception that when an organization self-insures, it in essence becomes the insurance carrier, explains Donley.

"The fear is that self-insuring will take up a lot of HR's time and will shift liability for things like COBRA and HIPAA to the employer. We haven't found this to be the case at all. The TPA administering the plan knows that if he doesn't do a good job, he can be replaced without disturbing the plan at all. So there's an incentive to provide good service every day."

What self-insurance does is give employers control over an expense that they want to oversee, he asserts.

"Health insurance is probably the biggest check, after payroll, that an employer writes. So employers want to be intimately involved in keeping track of costs and keeping them down. It's part of operating their business," he adds.


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Why self-fund
According to the Self-Insurance Institute of America, there are several reasons why employers choose the self-insurance option.

The employer can customize the plan to meet the specific health care needs of its workforce, as opposed to purchasing a one-size-fits-all insurance policy.
The employer maintains control over the health plan reserves, enabling maximization of interest income – income that would otherwise be generated by an insurance carrier through the investment of premium dollars.
The employer does not have to pre-pay for coverage, thereby providing for improved cash flow.
The employer is not subject to conflicting state health insurance regulations and benefit mandates, as self-insured health plans are regulated under federal law.
The employer is not subject to state health insurance premium taxes, which are generally 2% to 3% of premium
The employer is free to contract with the providers or provider network best suited to meet the health care needs of its employers

By Lynn Gresham
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