Compare cost control strategies of
employer-sponsored (employers buy from insurance companies) to self-funded
(employers cover costs of benefits) health plans. Include the following factors:
Riders
Enrollment periods
Provider networks
Third party administrators
Also discuss how the following affect cost control within group health plans:
Portability
Creditable coverage
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Self-funding is an alternative to fully insured group health insurance plans. Instead of an insurance company collecting premiums and paying your claims, the company funds the program, sets the rules and has control over paying claims. More than 60 percent of U.S. companies offering benefits use a self-funded program.
To compare the cost control strategies of employer-sponsored health plans and self-funded health plans, let's look at the factors mentioned: riders, enrollment periods, provider networks, and third-party administrators.
1. Riders:
Riders are additional benefit options that can be added to a health insurance plan. In employer-sponsored plans, employers typically have predetermined plan options provided by the insurance company. These options may include different riders for additional coverage, such as dental or vision benefits. However, the employer's choices may be limited to the options offered by the insurance company.
On the other hand, self-funded plans allow employers more flexibility in designing their own benefit package and adding riders as needed. They have more control over the specific benefits included and can tailor the plan to suit the needs of their employees.
2. Enrollment periods:
Enrollment periods refer to the specific times during which individuals can enroll in or make changes to their health plan coverage. In employer-sponsored plans, employees usually have specific periods, often once a year, to make changes to their healthcare coverage, such as switching plans or adding dependents.
Self-funded plans typically follow similar enrollment periods, but the employer has more flexibility to set the specific times and rules for enrollment. This can help align the enrollment period with the employer's HR processes and budget cycles.
3. Provider networks:
Provider networks consist of healthcare providers (such as doctors, hospitals, and specialists) that have contracted with an insurance company or third-party administrator. These networks determine which healthcare providers are covered under the plan and can affect costs through negotiated rates and discounts.
In employer-sponsored plans, the insurance company pre-negotiates contracts with healthcare providers and offers a network of providers for employees to choose from. The employers have limited control over the selection of providers and the contracted rates.
In self-funded plans, employers have more control over designing the provider network. While they may still collaborate with a third-party administrator to manage the plan, they have more flexibility in selecting and negotiating with healthcare providers, potentially leading to more cost-effective options.
4. Third-party administrators (TPAs):
TPAs are organizations that provide administrative services for self-funded health plans. They handle claims processing, enrollment, and other administrative tasks. In employer-sponsored plans, the insurance company usually acts as the TPA, managing the plan on behalf of the employer.
In self-funded plans, employers have the option to hire an external TPA or perform the administrative functions in-house. This flexibility allows employers to tailor the TPA services to their specific needs, potentially resulting in more cost-effective administration.
Now, let's discuss how portability and creditable coverage affect cost control within group health plans:
1. Portability:
Portability refers to the ability of individuals to maintain continuous health coverage when they change jobs or insurance. In employer-sponsored plans, portability can be limited, and individuals may face gaps in coverage when transitioning between employers.
In self-funded plans, employers have more control over portability as they can design plans that offer more options for continued coverage. For example, they can provide COBRA coverage or allow employees to convert their coverage into an individual policy if they leave employment. By offering greater portability, self-funded plans may enhance cost control by reducing the potential for gaps in coverage and associated costs.
2. Creditable coverage:
Creditable coverage refers to prior health insurance coverage that is recognized by a new plan when determining pre-existing condition waiting periods. Employer-sponsored plans often consider creditable coverage when employees switch from one employer to another.
In self-funded plans, employers have the ability to customize their creditable coverage policies. By properly recognizing and crediting prior coverage, employers can reduce the waiting periods for pre-existing conditions, which can lead to better cost control by avoiding unnecessary duplicate tests, treatments, and expenses.
In summary, self-funded health plans offer employers more flexibility and control over cost control strategies compared to employer-sponsored plans. This includes the ability to design benefit packages with customized riders, setting enrollment periods, selecting provider networks, and choosing third-party administrators. Additionally, self-funded plans may provide better portability options and creditable coverage policies, enhancing cost control within the group health plans.