Control Elements to Include with Self-Funding

Self-funding has proven to be a cost-saving strategy for employers that have implemented the approach in the past. Employers that have experienced the most success with self-funding have carefully implemented certain elements of cost control along with their self-funded program to help control claims payments.

The successful strategies have included:

• Selecting a TPA that successfully manages claims.
  
  
• Implementing a benefit design that properly includes patient cost-sharing.
  
  
• Implementing pre-certification, other utilization control approaches and early intervention case management.
  
  
• Implementing programs that gain payment discounts from cost effective providers and directing their employees to these providers through benefit design.
  
  
• Implementing tax advantaged strategies.
  
  
• Educating and rewarding employees to change poor health habits and lower claims.
  
  
• Implementing a well conceived written plan description to reduce confusion on the definition of covered services and the resulting disputes that lead to overpayments in the benefit program and unnecessary legal costs.
  
  
• Aggressively addressing areas of unusually high expenditures in the benefit program by early identification and timely strategy implementation.
  
  

Implementing and operating a self-funded program is as easy as implementing an insurance program. Most employers rely on a third party administrator (TPA) to implement the self-funded program. TPAs provide special skills such as experience with government regulations, trained claims personnel, specialized computer systems and in-depth knowledge of benefit design options. The TPA can help in all aspects of the program, including benefit design, defining stop loss needs, selecting a stop loss carrier, drafting required documents and benefit booklets, paying claims, collecting premiums, preparing management reports, analyzing claims expenditures and recommending design options to reduce costs.

The TPA selected should have a strong track record of client satisfaction and of paying claims. Since claims constitute over 80% of the costs of a self-funded program, claims handling ability is the most important element to consider when selecting a TPA. TPAs vary greatly in their ability to handle claims, and it is important to find a TPA with a strong record of holding claims payments to the lowest level without the patient being balanced billed by the provider of service.

The Employee Benefit Service Center,  your TPA, and your broker can help incorporate these elements into your program.