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Benefits and risks of being self-insured. Lincoln County Commissioner Rob Coffman. Agenda. Understanding Health Plan Self-Funding Advantages and Disadvantages of Self-Funding Individual v. Joint (Multi-Employer) Plans Healthcare Environment Post – ACA Questions?.

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Benefits and risks of being self insured

Benefits and risks of being self-insured

Lincoln County Commissioner Rob Coffman


Understanding Health Plan Self-Funding

Advantages and Disadvantages of Self-Funding

Individual v. Joint (Multi-Employer) Plans

Healthcare Environment Post – ACA


Benefits and risks of being self insured

Understanding Self-Funding

Self-insuring health plans

Self-Funding treats predictable claim cost as expenses rather than insurable risk.

Under a Self-Funded plan model an employer determines the amount of risk appropriate for their organization.

Employers purchase Stop Loss Insurance to protect against unknown and unpredictable catastrophic claims.

Self-Funded plans are governed by Federal ERISA instead of State insurance laws.

Governmental agencies like counties and municipals, however, are also subject to rules from the State Risk Manager’s Office (RCW 48.62.011)

Benefits and risks of being self insured

What is Stop Loss Insurance

Self-insuring health plans


  • To provide financial protection to a Self-Funded plan sponsor

  • Provides protection against a catastrophic event or from abnormally high frequency/severity

  • Severe high dollar claims such as cancer, transplants and dialysis are considered “shock loss” claims

  • The Stop Loss contract insures the Employer not the Employee

  • The medical plan established by the Employer accepts the responsibility for paying providers claims but limits it’s risk with Stop Loss

Benefits and risks of being self insured

Advantages & Disadvantages of Self-Funded Health Plans



  • Requires long-term commitment

  • More internal administration

  • More involvement in plan design decisions

  • Must contract for claims, other services

  • PPO discounts may be less than insurers'

  • Increased fiduciary liability

  • Variable financial risk

  • Still subject to ever increasing cost of healthcare claims (no magic bullet)

  • Limits the number of experienced consulting brokers available

  • Not subject to premium taxes

  • Not subject to state benefit mandates

  • No insurer profit margin built into rates

  • No broker commissions on full plan

  • Pay only for desired services

  • Greater control over plan design

  • Employer maintains claims reserves

  • Access to claims data

  • Full Credit for wellness savings

  • Independent claims and disease management

  • TPAs offer more services than insurers

Benefits and risks of being self insured

Weighing the Benefits

Self-insuring health plans

Risk Management – Charges, Commissions and Retentions

  • A Self-Funded health plan can allocate more of each dollar toward payment of medical claims through eliminating commissions, risk charges and insurer profit.

    Improved Cash Flow

  • Fully insured premiums are a form of pre-payment

  • Self-Funded plans pay as you go

    Innovative Plan Document Design and Control

  • Freedom from state mandated benefit laws allows for flexibility in plan design

  • Benefits can be tailored to the working population

Benefits and risks of being self insured

Weighing the Benefits

Self-insuring health plans

Plan Sponsor’s Experience

  • Employer is responsible only for the risks presented by members of the plan

    Risk Control

  • Stop Loss coverage can limit the employers risk while allowing it to retain control over claims and benefits

    Value-Based Benefits and Wellness Programs

  • Flexibility to design health risk assessment & prevention and wellness tailored to the groups demographics

    Improved Claims Data History

  • Software and investigative techniques can help curtail spending

    Savings Opportunities

  • Utilization of cost containment features increases savings opportunities

Benefits and risks of being self insured

Self-Funding for Washington Counties

Self-insuring health plans

Chapter 48.62 RCW provides authority for local governments to individually or jointly self-insure health care, accident, disability, death, and salary protection benefits. RCW 48.62.011 requires prior approval for the establishment of every individual and joint local government self-insured employee health and welfare benefit program. RCW 48.62.071 requires that specific information is submitted to the state risk manager for program approval.

Benefits and risks of being self insured

Individual v. Joint (Multi-Employer) Plans

Self-insuring health plans

Individual (Single-Employer) Self-Funding

  • Must hold 8 weeks of total expected plan expenses in reserve

  • Report annually to State – Report Form is located on the Local Government Self-Insurance Program website

  • Aggregate Stop-Loss recommended

    Joint (Multi-Employer)

  • Must hold 16 weeks of total expected plan expenses in reserve

  • Must also submit, as part of the Annual Report, prepared financial statement

  • In addition, audited financial statements must be provided to the State Risk Manager

  • Aggregate Stop-Loss required

Benefits and risks of being self insured

Changing Landscape of Self-Funding

Self-insuring health plans

  • According to Pricewaterhouse Coopers data, the percentage of Self-Insured employers with fewer than 1,000 people in their health plan programs has almost doubled – from 29% in 2008 to 48% in 2010

  • According to 2011 Kaiser/HRET survey of Employer/Sponsored Health Benefits, 60% of companies Self-Insure their health benefit programs, up from 49% in 2000

  • DOL Confirmed Staggering Savings under Self-Funding

    • Deloitte Advanced Analytical Consulting Group was quoted in a recent Department of Labor (DOL) report that fully insured premiums increased by $808 while self-funding only increased by $248, a difference of 326% in 2011

Benefits and risks of being self insured

Current Healthcare Environment

Self-insuring health plans

Accountable Care Act

  • Health care reform was enacted March 23, 2010

  • Self-Insured plans are exempted from some ACA reforms that apply specifically to insurers such as medical loss ratio (MLR) standards, rating restriction rules, and insurer fees

  • ACA provisions specifically applicable to “small employers” range from: fewer than 26 employees for tax credit eligibility to 100 employees or less to qualify for exchanges

  • Self-Funded is cost effective at a time when traditional insurance is predicted to become more costly due to ACA.

Benefits and risks of being self insured

2014 What to Expect

Self-insuring health plans

  • State health insurance exchanges established

  • Medicaid eligibility expands

  • Large employers (50+ employees) must provide health plan or pay a fine

  • Individuals must secure health coverage or pay penalty tax

  • Automatic enrollment of full-time employees in an employer’s health plan required (200+ employees)

  • No pre-existing condition exclusion allowed

  • Waiting period limited to 90 days

  • Cost-sharing amounts capped and annual limits removed

  • Maximum health premium discount for wellness program participation increased from 20-30%

  • Group health plan must report coverage by individual to IRS

  • Self-Insured plans will have to maintain certain levels of coverage in order to meet the threshold of a qualified health plan

  • Non-discrimination rules will apply to fully-insured plans

Benefits and risks of being self insured


Self-insuring health plans

Rob Coffman

County Commissioner

Lincoln County


Dan Fisher, CEO