In the popular ‘80s movie Caddyshack, there is a scene where all of the caddies are allowed to swim in the Bushwood Country Club pool, but only for 15 minutes. Despite the short allotment of time, mayhem ensues. Suffice it to say, you did not want to be in the pool following this cast of characters.
What does that have to do with Health Care Reform? Admitting the bizarre imagery and strained connection, one of the active strategies we are promoting with our client base is to get out of the fully insured pool—in other words—consider an alternative funding arrangement (e.g. level funding or self-funding), for your medical plan. Insurance companies have created new products (level-funding), dusted off old ones (minimum premium) and have relaxed underwriting guidelines (100 employees or more) that allow more groups to consider this approach.
As the Affordable Care Act gets implemented, self-funding allows employers to:
• avoid the Health Insurance Tax (HIT) that currently costs 2 to 3% of premium
• avoid a Connecticut State premium tax of 1.75%
• gain more plan design flexibility (avoid state mandated benefits) while still satisfying the federal minimum benefit level requirements
We are anticipating a migration to self-funding which will leave a smaller and arguably worse risk profile in the fully insured marketplace. This dynamic will accelerate the increase in insurance carriers’ manual rates (aka “The Pool”) that are blended with your claims experience which will drive up your rates.
In addition, as more employers move to self-funding, there will be fewer fully insured employers that will absorb the impact of the Health Insurance Tax, which will mean the federal government will have to increase the tax percentage to collect the required revenue they need off of a shrinking base of employers.
This is one of several strategic initiatives we will explore further in our upcoming seminar, A Guide for Chief Executives and Senior Business Leaders: The Impact of Health Care Reform on Your Business Performance. The event will take place on Thursday, May 23rd at the Society Room in Hartford, from 3pm to 6pm. If your organization’s management isn't already thinking about how they will respond to the changing health insurance landscape, this is the event to attend to get that process started. The event is specifically designed with senior leadership in mind—Presidents, CEOs, CFOs and VPs. If your senior management may have an interest in attending, please pass the information on to them.
Bottom line, there will be winners and losers in the age of Health Care Reform. Your organization’s purposeful approach to your Health Care Reform strategy—either active or passive—will dictate which side of the scoreboard you’re on. Though there continues to be a lot of uncertainty, we do know that you definitely don’t want to be the last one in the pool.