Employee Health Promotion

In recent years, it’s become increasingly common for companys with as few as 200 employees to explore self-insurance. But beware of hidden traps.

If your organization is weighing self-insurance â.” or has already taken it â.” here are three pitfalls that can create unexpected costs.

1. Unfavorable employee mix

It’s impossible to completely eliminate the risk of unexpected, high-dollar health claims. But here’s a guideline to decrease your risk. Health claim stats suggest the “ideal” staff member population for a self-insured plan is predominately young, non-smoking and male.

Be aware that stop-loss insurance carriers often “laser” those workers considered higher risk. Lasering means that your company would’ve to pay out much more in claims for these workers before the stop-loss coverage kicks in.

2. Loss of network discounts

Some firms learned after the fact that going the self-insurance route caused them to lose providers’ network discounts they previously received under fully insured plans. When analyzing  plan providers’ administration-only options, ask -

o  Will the provider’s network alliances work in your best interests, cost-wise?

o  Will the vendor only oversee claim payments or negotiate to build the best provider network, quality-wise, for your staff.

Bottom line –  You ought to get the same kinds of plan designs, networks and discounts as a fully insured plan.

3. Wasteful reinsurance contracts

If the language of your reinsurance contract doesn’t match your health plan’s summary plan description, you could be compensating for coverage you don’t need and can never use.

It’s also key to make sure your firm has enough money in reserve to cover run-out claims and other costs that may occur before reinsurance will cover payments. Best practice –  annual audits of your financial reserves.