Small Businesses are putting their businesses at serious risk
In talking with prospective employers seeking our “Decoder”, one of the most popular topics that arises is self funding. It is being sold like it is the magic solution for employers. The fact is, it’s being sold because it’s an expedient way for carriers and group agents to “stay in the group market.” This means, by offering self funding as the preferred option to “save money” the agent can keep an employer in a “group” policy.
A group policy is much better for a group agent because they can maintain the employer relationship and write greater premium with one policy, the commission is greater too. It is much easier to sell the “popular” fad solution to healthcare than to dig into the specific details of your plan. There is a large investment of time needed to do the best job comparing all the possible options. Normal commissions can not by themselves support this deeper analysis. As a result, for a sales agent, it’s much easier to sell self funding.
Unfortunately, in the process to “win” the sale important information about self funding is left out. There are pitfalls to self funding no matter what your agent, consultant, carrier, TPA or administrator say. Employers must consider the small print about self funding before jumping into this type of plan.
For larger employers, there are benefits to self funding, but self funding for a group of 25, 40 or 75 is a bad idea because the proposed gains can easily be outweighed by an unexpected $1,000,000 unpaid claim.
Here’s a short list of reasons that should give a small business owner pause before self funding.
1 – Being an Insurance Company Isn’t On Your Bucket List
Being self funded means you move out from under the safety of having an insurance company paying claims. There’s the potential that you may have to pay claims when the TPA/administrator/insurer decides not to pay.
Not to mention, all the new rules and obligations.
2 – You Want to Buy Coverage, Not Be the Coverage
Here is a quote that most people would call the “small print.” You won’t find it in the typical sales material or presentation. You will find it when you’re asked to defend the non-payment in court.
“The participating employer agrees to be solely responsible for compliance with all laws, including the payment of any required benefits that are not covered as illustrated in the Summary Plan Description or the stop loss policy.”
Administrator Actual Policy Language
3 – You Become The Expert In Making This Decision
This quote is a warning found in the sales material of a TPA, it’s terrific to see but rare to find sales material like this, with the truth, in sales promotional propaganda. At least, this carrier is being honest when they say, you should have experts telling you what to expect before you choose self funding.
“While many employers can benefit from a self-funded plan, it may not be the right choice for every business. The biggest question a small group employer has to consider is if the additional risk will jeopardize their business.”
Administrator Advertising Materials
If you go the route of self funded, you will need someone qualified to evaluate your risk before making the decision. Your sales agent, consultant, insurer, CFO, HR person are not qualified to make this assessment for you. Of course, this is a skill we have and put to work everyday, the BenStaff team can bring our independent evaluation skills to your team to balance all the noise and help you make an informed decision.
This service is built into every Decoder where an employer is giving this option consideration.
4 – You Didn’t Have Time to Read the Small Print
The Big Print makes promises but the small print takes those promises away. When your self funded administrator,TPA,insurer decides not to pay a claim, you’re on the hook. You as a business owner become the checkbook employees and courts will rely upon.
Hard to believe, why would a sales person you “trust” let this happen. It’s true, in today’s sophisticated and complicated healthcare world it’s becoming more necessary to independently evaluate your options.
CAN YOU SAY DOUBLE TALK
This is just one example of the big print:
“Your maximum self-funding cost for the plan year is determined up front – and it’s guaranteed not to change, …
And here’s one example of the corresponding small print written into the policy of the carrier who published the “big print” quote above. There are many more statements like this in every self funded agreement or stop loss policy.
- “We issued this coverage in reliance upon the accuracy and completeness of the information provided in the application form and during the enrollment process. If a material or fraudulent omission or misstatement is made in the application form, We have the right to deny any claim, rescind the coverage and/or modify the terms of the coverage or the premium amount.”
Actual policy language, page 1.
5 – You Didn’t Make a Benefit Plan to Tell Employees They Aren’t Covered
It happens, google the topic of “self funded plans that couldn’t pay claims” and you will find 42 million website hits. See the graphic of the google search done on that topic. That’s a few more sites than can be covered in this short note. The point is, there’s plenty of reading available on the many problems with self funding.
Do you Still Need Convincing? I’ll Review Your Options for Free.
If you are still questioning it’s viability for your organization, and you’ve read this entire post, send any quote you have received and the comparisons you have from agents consultants insurers or your internal staff and I’ll give you my two cents for free.
This offer is available to owners only. Send them to my email without PHI, djwatza@BenStaff.com.
Have a great weekend.
Source: Actual administrator and carrier language from marketing promotions and specimen policy.