The Solution to the High Cost of Healthcare

Fully insured medical plans are trending at an alarming rate. Annual premium increases of 16% – 20% are becoming a common place. With employee benefits being the #2 cost for an employer, what are your options to control these costs?

A recent approach has been the implementation of “Consumer Driven Healthcare”. High deductible Health Plans (HDHP), Health Savings Accounts (HSAs), and Health Reimbursement Arrangements (HRAs), have been promoted as the solution to the high cost of healthcare. The success of these plans have been mixed. After years of HMO type plans, employees have proven to be poor consumers of healthcare. Employee who have enrolled in “Consumer Driven Plans” are struggling to learn new skills to become better consumers. Having very little tools to work with, and limited if any training, the shock of transitioning to HDHP and HSAs has been a real challenge. Unfortunately even the most motivated employees have limited time to develop consumer skills, and many times results in employee frustration and low morale. Employers may realize lower productivity of their employees due to the fact that in order to navigate the complex health care delivery system, requires time during business hours.

A true benefit of the creation of Consumer Drive Health Plans is the introduction of the High Deductible Health Plan (HDHP). This plan deign offers a substantially lower fixed premium costs do to the amount of cost shifting to the employee / employer HSA / HRA. The introduction of a HDHP provides a perfect foundation for Split-Funding.

Large employer groups traditional self-insure their medical plan. Large employers have the advantage of a large number of employees to spread the risk of their self funded health plan. Unfortunately many self funded employers still need to off set some of their risk through reinsurance by way of a stop-loss policy. Stop-loss policies have become more difficult to obtain due to the recent developments in the industry and as a result of the losses of 9/11.

Employers who have opted to self-insure their benefits, do enjoy some real advantages over fully insured plans. Self-funded health plans have the flexibility to develop specific plan designs that fit the needs of their organization and their employees. If an employer, municipality or Union, has a collectively bargained benefit, self-funding offers the ability to ensure plan design with out the potential breach of a collective bargaining agreement.

What if you can take the advantages of each of these funding types and reduce the disadvantages? You can, through a Spilt-Funded Health plan!