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Myth #1
"Self-funding is only for companies with at least 200-300 employees."
The self-funding industry as undergone significant evolutions over the last several years. Stop-loss carriers have become more adept at mitigating risk for smaller employers with innovative product options. In addition, many TPA's have adapted their services to meet the needs of the small employer.
Myth #2
"Self-funding requires significantly more employer involvement."
It is extremely important to utilize the services of a benefits' consultant with significant self-funding experience, which alleviates this concern. The combination of this type of consultant with a highly experienced, highly skilled TPA will provide the necessary resources and management of these administrative tasks.
Myth #3
"Lasering is a common practice used by many carriers."
First of all, lasering, also known as "carving-out", by definition is a tool utilized within the self-funded industry to manage risk and potentially offset premium increases. In many instances it allows the employer to shift fixed premium cost into a variable claims cost.
In addition, the evolution of the stop-loss industry has created stop-loss contracts that now offer a guaranteed "no-laser" renewal option.
Myth #4
"Limited Run-In and Run-Out Protection"
The opponents of self-funding purport that claims can slip "through the cracks". This can certainly be true if a self-funded plan is not properly structured. However through proper short and long term planning, risk associated with insufficient contract basis can be alleviated. The flexibility and variation in the types of contract basis coupled with sufficient policy options significantly mitigate this risk. This is why it is imperative that consultation with an expert in the self-funding industry is recommended before considering self-funded options.
Myth #5
"Insurance carriers command the largest discounts from the local providers, as much as 40-50%, while the leased networks used by the self-funded plans usually only produce discounts between 10-20%."
This is simply false. The evolution of the Managed Care Networks has been dramatic over the past decade. The transparency of a self-funded plan provides detailed insight into provider discounts. Specifically, provider discount reports show self-funded plan discounts average around 35-50%. Furthermore, if fully insured carriers command greater discounts, one would certainly expect significant savings in a fully insured health plan - approximately 20-40% savings.