More Employers May Turn to Self-Insurance in Wake of Healthcare Reform

MyHealthGuide Source: Matthew Brodsky, Senior Editor/Web Editor, Risk & Insurance® Article

Employers weigh the difficulties of grandfathering their employee-health plans under new federal guidelines versus the opportunities of self-insurance. The self-funded marketplace could win.

After fearing and lobbying against federal health reform, the industry that caters to self-funding employers might actually experience new, profitable opportunities, thanks to the Patient Protection and Affordable Care Act.

In part, it’s because the uncertainty and higher costs that employers are feeling with their employee-health benefits could push more of them to some form of self-insurance.

“Most of the mandates of the healthcare reform weigh more heavily on the fully funded industry,” Anthony Mistretta, an attorney with the Pittsburgh-based HM Insurance Group Inc., told an audience of self-funded employers and vendors at a preconference session at the 30th annual national meeting of the Self-Insurance Institute of America Inc. in Chicago earlier this month.

“I think there’s going to be some opportunities,” he said, explaining that perhaps mid-size and smaller employers that currently purchase health insurance could instead turn toward self-insurance.

Opportunities could come about simply because the status quo might become unbearable or impossible for employers. Employers could be finding the process of grandfathering in their current benefits plan under the new law like having “tied their hands” in terms of plan design and cost savings, as Mark T. Hopkins, senior director of compensation and benefits at manufacturer Mohawk Industries Inc., discovered.

“We basically threw grandfathering out the window,” Hopkins said.

It could seem like a big hassle to have to completely rethink and redesign benefit programs.

On the other hand, employers could take the sunny-side approach and view healthcare reform as a one-time opportunity, as Jay Anliker, president and CEO of third-party administrator UMR, put it.

This could especially be the case for employers that may have never considered self-insurance.

What’s more, benefit brokers are reporting that health carriers are reducing or eliminating their commission schedules to meet the requirements of the minimum-loss ratios in the healthcare-reform law, said Jerry Castelloe, regional president of independent benefits administrator CoreSource Inc.

The country’s largest employers appear to be holding their breath for that clarity. By his estimates, Joe Plumeri, chairman and CEO of Willis and keynote speaker at the conference, said about 98% of Willis clients are not doing anything about healthcare reform yet because they don’t understand it.

Editor’s Note: Agents that  survive in the group health insurance market will be those who focus advising self-funded employer groups on a fee basis. This will entail more than just getting a quote and presenting it to a prospect. It will take a successful agent to have the industry connections necessary to assist in all aspects of a self funded plan, from administration, provider reimbursement expertise couple with direct contract negotiaions with targeted members of the medical community, access to quality stop loss carriers, relationships with captives, and an array of other important components of a cost effective self-funded health care plan. The day of selling a plan off a spreadsheet will gone.