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MedBen Self-funding Solutions Reduce Small Group Risk

01/20/15

  11:36:00 pm, by MedBen5   , 451 words,  
Categories: Health Plan Management, Health Care Reform, Taxes, Stop-loss

MedBen Self-funding Solutions Reduce Small Group Risk

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While only a small percentage of small companies (100 or less full-time employees) currently self-fund their health care plan, the Affordable Care Act has created multiple regulatory incentives that has prompted more of them to consider making the switch from fully-insured coverage. And MedBen offers a variety of self-funding options to make the transition easier!

The Brookings Institution, a independent research organization, recently highlighted the five main regulatory benefits that small firms derive from self-funding their health care plan:

  1. Self-funded plans are not subject to the Essential Health Benefit (EHB) requirements of the ACA.
  2. Self-funded plans are not subject to the community rating requirements that restrict insurers from using such health factors as age and smoking status to set premiums.
  3. Self-funded plans are not subject to medical loss ratio requirements, which mandate that at least 80% of premiums received by the insurer be spent on health care claims.
  4. Self-funded plans escape the health insurance tax mandated by the ACA on most health care premiums paid to traditional health insurers (2% in 2014).
  5. Self-funded plans also escape the state taxes on healthcare premiums paid to traditional health insurers (roughly 1.75% in 2014).

Additionally, self-funding allows for greater flexibility than traditional insurance policies, and total costs for such plans are generally lower.

Brookings notes that small group self-funding does carry some risk, in that the reduced pool of employees means that a spike in claims activity has a greater financial impact. But stop-loss insurance helps to limit potential losses -- and MedBen can help reduce the risk further still.

Last year, MedBen introduced reinsurance captive programs to its range of self-funded options. With a captive, employers get the financial and regulatory advantages of self-funding, while spreading the risk among multiple groups.

In a captive, a portion of the collective stop-loss premium is held in a separate “captive layer” from which claims above the specific deductible are paid. Any funds remaining in the captive layer go back to the groups – which in a good claims year can represent a considerable return.

MedBen also offers Split Solution, a partially self-funded product available to groups with as few as 20 employees. Employers can share in the savings that come from reduced employee claims but still maintain budgetary predictability and plan design flexibility.

The Split works much like a regular health plan, with one notable difference: Once the employee deductible is reached, the employer funds eligible claim costs up to a preset employer retention (deductible) limit. By retaining some of the claim cost, you can lower premium cost while protecting your business from large claims.

Learn more about these and other self-funded solutions for small businesses by contacting MedBen Vice President of Sales & Marketing Brian Fargus at bfargus@medben.com or visiting the MedBen website.

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