As healthcare costs in the U.S. continue to skyrocket, the search is on for new ways to reduce costs. This is especially true for employers seeking to reduce the costs of employee benefits. One solution that employers are turning to is implementing self-funded health plans and using the strategy of reference-based pricing.
Choosing Between Fully Insured and Self-Funded Health Plans
There are some key differences that distinguish traditional, fully insured plans from self-funded health plans. In a fully insured plan, the employer pays a fixed monthly premium. This rate does not change no matter how low or high the claims associated with the plan are. Premium funds that are not used to pay claims are not returned to the employer, except for what is absolutely required by the Affordable Care Act.
Self-funded health plans, on the other hand, allow the employer to pay their employees’ medical claims directly. Instead of going through an insurance carrier, employers with self-funded health plans turn to a third-party administrator to administer the plan. Third-party administrators, or TPAs, process claims, issue ID cards to employees, provide customer service, and an array of other services that take the burden of administration off of the employer’s shoulders.
Understanding Third-Party Administrators
A third-party administrator is capable of providing a variety of operational and administrative services for self-funded health plans and benefit trusts. Managing administration requires expertise, effort, and resources. That’s why so many employers turn to TPAs. A third-party administrator can use their expertise on benefits and health insurance to ease the administrative burden for employers. TPAs have the expertise to monitor and advise employer-sponsored benefit plans.
The Advantage of Reference-Based Pricing
Reference-based pricing is a method that sets a maximum allowable charge for specific medical services. Rather than allowing medical providers to set prices, a reference-based pricing plan pays a percentage of the reimbursement levels used by the Centers of Medicare and Medicaid. Self-funded health plans use reference-based pricing so that medical providers are still paid fairly, but the employer is protected from the high rates that major insurance carrier plans pay.
The cost savings associated with reference-based pricing is noteworthy. Beyond the lower claim costs, this pricing method allows employers to track how their benefit dollars are being spent. Self-funded health plans give employers access to information on claims and their costs! This information is a window to spotting trends that are unique to their workforce. This gives employers the opportunity to take an active role in planning for the future of their employee benefits! From recognizing specific employee health needs to creating a long-term financial strategy.
Finding a Better Solution With Boon
At Boon, we tailor our healthcare solutions to meet the needs of each individual client. As the parent company of a licensed third-party administrator and insurance agency, we have the expertise and experience to create a better benefit solution. Boon has the industry knowledge to advise on self-funded health plans and craft each employer solution through our consultative approach. We’re experts in our space and offer a robust roster of in-house services. This is what we do best.
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