COVID-19 continues to have a negative impact on the cost of care. For example:

Our partners at USI outline how much these factors will impact health insurance, depending on the type of plan you have in place.

Weathering Market Volatility

Fully funded health plans pay a monthly premium to the insurer in return for paying plan member claims. Insurers benefit when claims costs are kept below premium, retaining any excess as a profit. When market instability makes it difficult to foresee claims costs, insurers respond by increasing margins, which is passed along to fully funded health plans in the form of higher premium.

Partially self-funded plans contract with an insurer or a third-party administrator (TPA) to administer the plan, but the employer funds the claims. Employers benefit when claims costs are kept low, reserving unallocated funds for future claims. While partially self-funded plans may be impacted by increasing claims costs, they are better able to weather market volatility and keep costs relatively low, compared to fully funded. This is because partially self-funded plans:

For example, health plan usage dropped off significantly for both fully funded and self-funded plans during the early months of the pandemic. Self-funded plans saw a decrease in claims costs of $18 per member per month (PMPM). Fully funded plans overpaid premiums by $25 to $72 PMPM in 2020. Despite lower usage, market volatility kept premiums high for most fully funded plans in 2021.

Optimized Self-Funded Plans: Even More Savings

Employers that already leverage a partially self-funded plan can realize additional savings by optimizing the plan and reducing the cost of claims:

Purchase plan components separately — Unbundling self-funded plans allows an employer to evaluate and select plan components based on price and quality. From pharmacy carve-outs and independent marketing of stop-loss, to benchmarking certain fees and implementing targeted disease management, employers often see 10% to 15% of additional savings per component.

Reduce fixed and administrative costs — By reviewing contract language and negotiating required service fees, employers can further reduce administrative costs associated with a partially self-funded plan.  

Address claims costs — Self-funded employers benefit the most by keeping claims costs low and preventing catastrophic claims. Employers can employ a variety of solutions to better manage overall claims costs, such as population health management, chronic disease management and prescription drug utilization.

How USI Can Help

USI offers a wide range of solutions to manage fixed costs that can add up to significant savings, including:

This post is provided by an HR Elements partner, USI Insurance Services. If you want to learn more about the benefit options that would be best for your company, connect with HR Elements. We’ll be there every step of the way!