Hands down, self-funding is the most efficient financing mechanism for funding employee healthcare benefits.
Compared to fully insured plans, a self-funded health plan can allocate more of each dollar toward the payment of medical claims, eliminating insurance carrier profits, risk charges, and other costs of a commercial insurer, such as marketing and overhead. Costs also decrease thanks to the sponsor’s ability to exert greater control over administrative expenses and utilization.
While self-funding makes sense for most larger Plans, all self-funded Plans are not created equal. If your employer-sponsored healthcare Plan is an Administrative Service Only (ASO) Plan through a large carrier—e.g., BlueCross, Highmark BlueShield, Aetna, or United—this arrangement may fall short of delivering the cost savings you want, and that we know is possible. Let’s take a deeper dive into a typical ASO Plan.
HOW DOES A TYPICAL ASO PLAN WORK?
ASO Plans deliver a turnkey approach to self-funding. By this we mean, the administration of claims, pharmacy contracts, network access, medical management, etc., included within an insured Plan is simply moved onto a self-funded chassis, and you fund claims retrospectively vs. prospectively when your Plan is insured. The savings delivered by an ASO Plan is usually limited to reducing fixed costs by removing the standard carrier profits, the carrier risk fees, and premium taxes. Not bad, but you can do so much more.
To dramatically lower your medical and prescription drug spend, you must first self-fund your Plan and then unbundle the Plan pieces, specifically the stop-loss policy, claims administration, pharmacy vendor, provider access arrangements, and your broker. Yes, your broker. When you unbundle your Plan, you essentially evaluate all the disparate pieces and rebuild the Plan, removing waste in the form of overpayments, undisclosed revenue streams, and misaligned incentives.
Your new unbundled Plan vendors will welcome or even suggest ways to save money. You will work as a cohesive team pulling in the same direction for the greater good of the Plan and your bottom line.
Real results! The experts at BCF Group have the know-how to help businesses dramatically lower Plan costs and increase benefits by moving from traditional arrangements to unbundled Plans.
Call us to discuss how we can change your next renewal from UGH! to WOW!