Breaking Out: Why Companies Are Abandoning Traditional Health Insurance in Favor of Self-Funded Solutions | Insurance business America
Employers want better control over their healthcare costs
Life & Health
By Nicole Panteloucos
This article was created in collaboration with Verikai.
The importance of health insurance cannot be overstated – it is a crucial part of employee well-being and financial security. For decades, fully insured health plans have been the default choice for many employers, offering a predictable model.
However, the landscape is changing. More and more companies are switching to self-funded health insurance and are striving for greater transparency, control and cost savings.
This trend, driven by advances in data analytics and artificial intelligence (AI), is changing the way companies approach health insurance.
James Hughes (pictured), Senior Sales Executive at Verikai, sat down with Insurance Business to provide insights into the reasons behind this migration and the benefits of moving to self-funded solutions.
The Limitations of Fully Insured Plans
Comprehensive insurance has long been the preferred option for employers, particularly those with smaller employee populations.
Under this model, employers pay a fixed premium to an insurance carrier that manages the claims. According to Hughes, this approach has significant drawbacks.
“The full insurance model does not provide meaningful information to their customers,” he said.
“Employers do not receive access to their claims data, such as: B. Beneficiaries for medical treatment or prescription costs. They are simply handed an extension every year, often with an increase in costs, with no and/or little justification.”
This lack of transparency and control has frustrated many employers because they are unable to make informed decisions about their health plans or understand the factors that drive cost increases.
The Benefits of Self-Funded Plans
According to Hughes, partially/fully self-funded plans, in which employers assume the financial risk for their employees’ health/RX claims rather than purchasing traditional “off-the-shelf” insurance, are becoming increasingly popular.
A recent study published in Health Affairs found that in 80% of U.S. counties, the majority of health insurance enrollees are enrolled in self-funded plans. Additionally, the number of self-funded employers increased from 55% of the market in 2015 to 60% of the market in 2021.
This shift is largely due to the increased transparency and control these plans provide over healthcare costs.
“When an employer moves from a fully insured arrangement to a self-funded program, it gains the opportunity to better contain costs and modify the benefit programs offered to its employees,” Hughes said.
“This includes adjustments to catastrophic health coverage, RX forms and other plan elements. The employer gains access to their claims experience, enabling them to make informed decisions about what is best for their employees.”
Hughes said this flexibility comes from the fact that self-funded plans are not limited by state filing requirements.
“Carriers that offer fully insured programs must submit draft benefit plans to the states in which they do business. Once submitted, no variations are permitted. With a fully insured contract (with guaranteed costs), an employer’s best-case scenario is waiting for an expensive claim to be made by the carrier at a later date.”
Hughes explained: “For example, if a fully insured employer wanted to change RX forms to exclude GLP-1 drugs, their hands are tied until resubmission, whereas this is an option for self-funded buyers.”
Self-funded plans also offer employers the opportunity to actively participate in health loss.
In the event of a favorable loss ratio, employer groups receive either a portion or all of the overall benefit, a contract functionality not possible with fully insured plans, Hughes said.
The role of data and AI
The transition to self-funded plans has been made much easier by advances in data analytics and AI.
Companies like Verikai are at the forefront of this movement, providing employers with the tools they need to effectively analyze and manage their health data.
“We simplify data access and enable decision makers to confidently move away from the fully insured market,” said Hughes.
“Verikai uses AI and machine learning to provide a comprehensive analysis of past and current claims and a risk prediction for the following year.”
The platform uses basic census information such as name/age/gender/geographic location to create risk assessments for target groups.
Verikai also asks for street address information when possible to make the business unique in its own community.
“Although not required, street addresses allow for improved SDoH (Social Determinants of Health) data collection, thereby increasing our “match rate” for a given population. This value allows employers to predict future risks and make informed decisions,” said Hughes.
Verikai’s streamlined approach enables employers to quickly assess risk and confidently transition to self-funded plans.
“We empower every group we work with to achieve clarity around three key objectives: risk selection, risk avoidance and risk mitigation,” Hughes said.
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2024-06-14 14:47:17
www.insurancebusinessmag.com
