We have all known it, the proverbial idea that great things come in the smallest of packages. Happy marriages come in a ring box and Cheerios come in individual servings. But when it comes to the Affordable Care Act (ACA), and self-funding your employee health insurance, good things come in all packages—pros and cons alike. With the inception of the ACA, and the regulatory incentives to self-fund that came with it, more companies are considering self-funding their health plan. However, the current Supreme Court case, King vs. Burwell, is contesting the legality of certain tax credits offered through the ACA, which raises an important question: Does the ACA make self-funding more attractive with added incentives and exemption opportunities?
There are many regulatory and alluring incentives that come with self-funding, such as avoiding medical loss ratio requirements or exemption from the health insurance tax mandated by the ACA, but in order to more accurately weigh the risk vs. reward of self-funding, the following questions should first be answered:
-Is the cash flow able to sustain the switch?
-Will the cost of providing health insurance to employees exceed the premium collected?
-Do you have the analytics tools to manage the land mine of risks that are your health plan members?
Consider the third question: there is a reason most self-insured companies are worried about their chronic condition population – it is typically the most costly group of health plan members. Chronic diseases, like heart disease and diabetes, are the leading cause of death and disability and afflict about half of the American population*.
Those with chronic conditions use more than 75 percent of hospital stays, office visits, home-healthcare and prescription drugs. So it’s no surprise that the cost of chronic conditions is high, at two-thirds of all healthcare spending. If a company does not have the proper predictive analytics, wellness program guidance and implementation in place to mitigate the cost associated with chronic condition members, the answer to that third question is a very simple and honest, no.
Companies who answer these three questions are more likely to benefit from the cost-saving opportunities of self-funding in the advent of the ACA and big data. Once answered, all three questions can be positively impacted, supported and mitigated with the right care plan and analytics. The opportunities are there for all, but only those companies that leverage and customize big data to meet specific needs, will reap the benefits.