More and more employers are discontinuing their fully insured health coverage and switching to self-funded models so they can gain control over the increasing cost of employee health insurance. This is an unbundled approach that separately hires all of the required functions—medical provider networks, carrier or third-party administrator, pharmacy benefit manager, stop-loss insurer, and consultants—subject to competitive bidding. With this approach, there can be significant cost reductions, usually in the range of 5% to 10%.
Employers are also concerned about quality and administrative efficiency. In many cases, quality remains unchanged because self-funded programs are able to retain the exact same medical networks and coverages previously offered. The transition happens behind the scenes, and employees are often not even aware of it. All the moving parts can be coordinated through a broker or an outside consultant, who handles the administrative burden, and in many cases, can provide data and reports that give employers added insight into employees’ healthcare “experience.”
In this article, Milliman’s Jennifer Janvrin examines the key benefits that employers can derive from transitioning to a self-funded program and provides an overview of the actuarial parts of the program.