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Primer on self-funding of medical costs -- what are the pitfalls? What


Guest Jeff Belanger
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Kirk asks why federal mandates will make self funding less attractive.

One of the major advantages for a multi-state company to self fund is the avoidance of conflicting state mandated benefits for insured plans.

The variations among the states concerning their insurance laws also affects the costs of doing business by insurance companies who are licensed in more than one state.

One of the suggestions advocated by both employers and some insurance companies is to have the federal government take over the supervision of the insurance industry ("Over our dead bodies" shout the state insurance commissioners) and eliminate the individualized state insurance laws (and departments).

This will lead to one set of rules for insurance companies and one set of mandated benefits for employers.

Thus, goes the argument, one of the major reasons for self funding will have been removed.

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Larry:

Thanks, but no thanks to the feds. Overseeing the insurance industry. However, I do agree that state mandated benefits are a major problem for insurers and employers. It would be advantageous to everyone to have a national standard, but I fear the special interest groups would have a major problem with that. How else would acupuncturists, chiropractors, psychologists, midwives, message therapists, nurse practitioners, osteopaths, podiatrists, social workers and other such practitioners get their piece of the pie?

Why should only 5 states mandate coverage for acupuncturists? Is it because they have a concentration of acupuncturists? What about only 19 states mandating coverage for nurse practitioners, 28 states cover nurse midwifes (must be the sparsely populated states????)

If my memory is correct, I believe that New Hampshire mandates coverage for a hair prostheses for loss of hair after chemotherapy (did some politician’s family member have a claim denied?).

Then we have the great Bible belt state of North Carolina that mandates coverage for pastoral counselors, Huh?

Birthing centers in Pennsylvania? I don’t know anything about birthing babies Ms Scarlet!!!!

There are too many special interest groups out there to have a national agreement or standards on what practitioners or medical coverages should be mandate in medical policies. Keep self-insuring when you can and maybe the insurers will put enough pressure on the insurance commissioners to do something that makes since.

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I think the argument that more federal mandates makes self-funding less attractive is this: In a state such as Ohio, there are relatively few requirements for health insurance, an exception being HMO's which are more heavily regulated. If the federal govt starts requiring benefits such as maternity stays, mastectomy reconstruction, etc. that bring the mandates up to par with state mandates, why not insure and let the insurance company bear the risk. I don't think we have quite gotten to the point where federal mandates are as burdensome as state mandates. But every time the feds do mandate something it causes some of our groups (especially smaller ones) to rethink the self-fund vs. insure situation.

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Jeanine:

I think you will find that in any group medical plan that is experience rated, the employer bares the risk of claims and cost of stop-loss premiums regardless of whether they self-insure or fully insure. Even in the case of a non experienced fully insured plan the cost reflects the claims experience. Therefore, any mandated benefits are going to end up costing the employer/participants.

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  • 1 year later...
Guest keith frazier

this is actually more of a question.......is a self-funded plan in association with insurance required to file a seperate 5500 from the other welfare benefit plans funded solely with insurance or can it be aggragated with the other plans.

keith frazier

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Basically, Kip's covered it. The filings are about plans, vs funding methods. That's the organizing principle. Practice is another matter. Firms submit in a wide variety of ways. Much would depend on your organization's operating style; for example, are you buying/selling entities (with their own plans) regularly?

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