Businesses are looking at all options to minimize PPACA's costs, including self-insuring or partially self-funding. So, how many employees is the minimum to maintain a healthy pool and successfully partially self-fund? I realize that a lot of the risk just disappeared since GI now lets employers jump back into the fully insured market if they have high losses. But, even so, how low is too low when it comes to participating members?
How Low Can You Go with SF or PSF Plans?
- Thread starter Ann H
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We have groups as low as 5 with self-funded plans. Since small group reform 15 years ago or so, it became even easier for groups under-50 to self-fund because of what you stated in your post...they could easily jump back into the GI market.
In many ways I find small group (under 50) much easier to self-fund than the market between 51-250 or so. To begin with I would never recommend a group under 50 self-funding with a pay as you go plan. These should always be some kind of level premium funding with a retro. Once you get above 50 there are some markets that will issue stop-loss for a pay as you go plan, but now you have to make sure the employer is truly aware of all the issues surrounding this. It is rare to find such a group, let alone make sure they follow the rules. And to top all of that, they don't have the bail-out available to GI coverage.
- 4,096
I have yet to see a partially self funded or fully self funded plan makes sense on a group under 50.
When you compare the risk and fixed cost to a fully insured plan, the fully insured plan makes more sense.
Cigna has PSF that looks good but it usually comes in about 10% higher than fully insured. The claims pooling is usually given back in an 18 month period.
For a small group to PSF they really have to have an environment of wellness at the company. There is just too much risk.
Before I would self fund a small group, I would look at HRA on a group plat from.
When you compare the risk and fixed cost to a fully insured plan, the fully insured plan makes more sense.
Cigna has PSF that looks good but it usually comes in about 10% higher than fully insured. The claims pooling is usually given back in an 18 month period.
For a small group to PSF they really have to have an environment of wellness at the company. There is just too much risk.
Before I would self fund a small group, I would look at HRA on a group plat from.
You and I have this discussion, or a variation of it, on and off over the past year or so. I don't doubt that this may in fact be what you have experienced, and your belief, but we have not.
The CIGNA product you have mentioned is not one of the more competitive ones in the marketplace. It has a higher admin/fixed cost than others and does have a longer payout period. But there are many others much more competitive.
The risk for a group that is in a GI environment is almost non-existent.
As for the HRA, it is a viable alternative for some groups, no doubt about that. But it tends to have a higher fixed costs, so if the group is a good fit for the level premium self-funding plan, the HRA becomes very expensive.
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- 4,096
I have yet to find SF PSF option for small group that makes sense.
For the last 3 years I have looked at all the options in the market place. A good option with limited risk and lower cost than fully insured does not exists. If it did I would be selling it.
I don't know how TPA's are going to make it? Eventually the rural market will dry up.
For the last 3 years I have looked at all the options in the market place. A good option with limited risk and lower cost than fully insured does not exists. If it did I would be selling it.
I don't know how TPA's are going to make it? Eventually the rural market will dry up.
- 570
I'm in Washington State and have just started having groups looking at the model through Cigna too. I recently quoted a group with 67 participating members and the Cigna model came in with the best rates out of 5-6 fully funded companies.
However, they were only 3% lower than the next in line and Cigna requires INDIVIDUAL medical questions for EACH employee. This was more than the group wanted to do, since the savings weren't significant enough to go through all the steps.
If I remember correctly, Cigna also keeps 1/3 of the surplus at the end of the year, which is a bit steep.
I like the general idea of getting companies more invested in the health of their workforce, but I have yet to actually write a SF or PSF group, although I'm getting closer.
Anyone else running into groups not wanting to complete employee level health questions???
However, they were only 3% lower than the next in line and Cigna requires INDIVIDUAL medical questions for EACH employee. This was more than the group wanted to do, since the savings weren't significant enough to go through all the steps.
If I remember correctly, Cigna also keeps 1/3 of the surplus at the end of the year, which is a bit steep.
I like the general idea of getting companies more invested in the health of their workforce, but I have yet to actually write a SF or PSF group, although I'm getting closer.
Anyone else running into groups not wanting to complete employee level health questions???
If fully insured small group goes away, which I expect it will within a few years, there is no comparison.
I was active in the SF business from 1986 -2000 and had quite a few under 50 plans. Most worked out, some didn't.
My carriers wrote stop loss down to 25 lives. Brougher had plans down to 10 and wrote a "ton" of business from 10 - 50.
It's not for everyone.
The company Lee works with have some very attractive arrangements for small group. With individual GI and a shrinking small group market they are poised to write a lot of business.
Put aside the fact that the savings were not that great, maybe the group is not an ideal candidate for self-funding. But the use of individual applications is a must. The discussion you should have with the owner is that the applications are the only way you, the new insurer in a self-funded program, should want to know the risk.
- 4,096
Underwriting is a huge factor with SF or PSF plans.
The problem with FI small group is you don't have access to the claims data. You have to have claims data so that the actuaries can make an informed calculation of risk.
I still think SF plans for group under 50 is a bad idea.
Assurant is suppose to be coming out with a SF for small group. I guess they have been having success in Illinois with it. I am looking forward to exploring that option.
The problem with FI small group is you don't have access to the claims data. You have to have claims data so that the actuaries can make an informed calculation of risk.
I still think SF plans for group under 50 is a bad idea.
Assurant is suppose to be coming out with a SF for small group. I guess they have been having success in Illinois with it. I am looking forward to exploring that option.
We market the Assurant plan now and it appears to be one of the more competitive at this point, but the next 3 years or so will be the key to their success.
Your comment about "the problem with FI small group is you don't have access to the claim data" is not an issue with self-funding small groups. Even if the data were available, it is not credible, which is why you utilize individual medical underwriting disclosures.
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