| Advantages and Disadvantages of Self-Funded Insurance Plans

Some businesses provide health or disability benefits to their employees through a self-funded plan, also referred to as Administrative Services Only (ASO). In this type of plan, instead of paying fixed monthly premiums for insurance coverage to an insurance company, the employer uses company funds to pay each claim as it is incurred. In essence, the employer stands in the shoes of the insurer.

This type of arrangement is not for every business, and works best for those that have more than 50 employees but more prevalent with groups over 100. Companies with fewer employees may decide it could work for them, but they must have sufficient cash flow to make a self-funded plan viable.

In order to assist employers to decide whether or not it would be in their interest to have a self-funded plan, they need to evaluate their existing plan and review past claims experience if available, specifically large claimant information. They also need to weigh the advantages and disadvantages to such a plan before making the final decision to transition from a fully insured plan to a self-funded one.

Advantages To Employers

 

  • Improvement of cash flow: Self-funded plans only pay submitted claims and can reserve the funds that normally would have been used to pay for a fully insured plan to accumulate interest and increase cash flow.
  • Ability to avoid state mandates: Self-funded plans are regulated by ERISA, which is federal law, and not controlled by the individual state’s insurance laws.
  • Flexibility in benefit design: Employers can choose what benefits to provide as opposed to insurance companies which must provide coverage consistent with the plan provisions they have filed with the state.
  • Flexibility with plan components: Employers can select vendors, such as plan administrators, health care providers and others with whom to contract to best serve the specific needs of their employees.
  • State tax savings: Self-funded plans save about two to three percent on every dollar since they only pay taxes on the Stop-Loss coverage they purchase, not on the total cost of a fully funded plan.
  • Savings on insurance carrier risk charges: Claims processing by employers is less expensive than the cost of fully insured plans.
  • Rebates for prescription drugs: The plan may be able to receive a portion of pharmaceutical rebates
  • Claims data access: Employers of self-funded plans have access to claims data they do not have access to under fully-insured plans due to HIPAA privacy requirements. This helps them analyze and predict future plan costs.
  • Cost of plan administration: This may be slightly less expensive than a fully-funded plan.

Disadvantages To Employers

 

  • Potential for higher costs: There is always the chance that the actual costs will be greater than the prediction and that could mean the self-funded plan was actually more expensive than a fully-funded one.
  • Need to purchase stop-loss insurance: In order to limit employer liability for catastrophic events, employers purchase stop-loss insurance.
  • Budgeting problems: The amount needed to pay claims varies from week to week, making it difficult to budget.
  • Employer becomes a fiduciary as plan administrator.
  • Privacy requirements of HIPAA: Employers must develop procedures for protecting the privacy of the health records of their employees.
  • Cost of drafting plan documents: Employers are responsible for all plan documents including a plan summary and description.
  • Requirement to have an appeals process: This must be in place so employees have recourse if their claims are denied.
  • Must meet IRS non-discrimination requirements: If these requirements are not met, there may be a substantial penalty imposed.

The major issue employers who are considering self-funded programs must consider is that in the self-funded plan, the employer is the one at risk for paying the claims. For companies with fewer than 50 employees, self-funded plans may not be the best option, although it is possible to reduce the risk somewhat by purchasing excess-risk coverage.

For small business employers, it is recommended they make this decision after consulting with SIG and providing the company with as much information as possible concerning the type of work force and past claims. This will make it easier for SIG to help the business owner assess whether or not to choose a fully insured or self-funded benefit plan.


| Top 3 Benefits of a Telemedicine Program

Just think of it as interactive healthcare.

Yes, we’re talking about the next-generation, innovative form of healthcare known as “telemedicine,” which is, essentially, patients seeking medical treatment or consultation not in a physical doctor’s office, but via 24/7/365 on-demand access to affordable, quality healthcare. Anytime, anywhere.

And these benefits are far-reaching – they do not just benefit the everyday person in need of around-the-clock healthcare. They extend to employers, families, children and much more. It’s quickly becoming a must-have benefits of all workplaces and fills an immediate need for many hard-working people looking for constant coverage and protection for their loved ones.

It’s estimated that over 10,000 Americans have access to telehealth programs – and the results have been overwhelmingly positive. According to studies, the leading telehealth providers report a 97 percent customer satisfaction rate, 99 percent client retention (more…)


| Open Enrollment with Jellyvision: Meet ALEX

Talking about health benefits isn’t sexy. We know it. You know it; but what you don’t know yet is that it doesn’t have to be boring and confusing anymore. Before open enrollment everyone has a lot of questions. However, sometimes, you just cannot find the time to answer all of them in person or over email. For those of you that work for organizations with offices all over the country getting together to talk about health benefits is almost impossible!

At Silberstein Insurance Group (SIG), we’ve uncovered a way for employees across the country to have custom communication with their Benefits Administrator. We’re pleased to introduce Jellyvision.

Jellyvision is a well-known video game design company that has literally made a game changer in the workplace. By using animations and humor (more…)


| 8 Steps to a Successful Employee Wellness Program

workers chatting while enjoying healthy lunch at the office

Author: Rachel Druckenmiller

For countless companies, employee wellness programs have become one of those “everybody’s doing it” trends. With the best of intentions, businesses around the world are implementing wellness programs, often as a way to reduce health care costs.

Without bottom-up and top-down support, adequate resources, and a compelling “why” for putting such programs in place, however, we are likely to become frustrated and may even grow to resent the very idea of a wellness program. Focusing on the value of a healthy, vibrant, energized workforce for what it does to boost morale, recruit and retain talent, and build camaraderie can be a helpful perspective shift to take when trying to determine why you want health and well-being to be a focus of your organization.  (more…)


| SILBERSTEIN INSURANCE GROUP ANNOUNCES NEW MARKETING DIRECTOR

SILBERSTEIN INSURANCE GROUP ANNOUNCES NEW MARKETING DIRECTOR

Baltimore, Maryland (October, 2014) – Silberstein Insurance Group (SIG), one of the largest independent employee benefit firms in the Mid-Atlantic region, is pleased to announce the new hire of Dulaney Farkas as Marketing Director. In her role, Dulaney will be responsible for the development and implementation of an overall marketing strategy.

“We are very excited to welcome Dulaney to SIG.  She brings a wealth of experience and marketing expertise and has a proven track record in delivering success.  We are excited to continue to drive forward our ambitious growth plans with her addition to the team.” (more…)


| Reminder: Transitional Reinsurance Fee Reporting for Self-Insured Medical Plans Due Nov. 15, 2014

As a reminder, employers that sponsor self-insured major medical plans must report their annual enrollment count to the U.S. Department of Health and Human Services (HHS) via the pay.gov website by November 15, 2014, as part of the Affordable Care Act’s (ACA) transitional reinsurance fee (TRF).

For the 2014-2016 calendar years, the ACA requires carriers and self-insured group health plans to make contributions under the TRF program to support payments to individual market issuers that cover high-cost individuals. (more…)


| Advisory: Employee Benefits and Same-Sex Marriage

On June 26, 2013, in United States v. Windsor, the U.S. Supreme Court ruled that Section 3 of the federal Defense of Marriage Act (DOMA) was unconstitutional.

That section of DOMA defined “marriage” and “spouse” as excluding same-sex partners for purposes of determining the meaning of any federal statute, rule or regulation. Prior to the Windsor decision a handful of states and the District of Columbia recognized same-sex marriage. Since the Windsor decision same-sex marriage has either been legislatively approved or court mandated in a majority of the states: as of October 17, 2014, same-sex marriage is considered to be legal in 30 states and the District of Columbia.[1]

Same-sex marriage is effectively legal for federal benefits law purposes and now legal in a majority of states, largely as a result of the U.S. Supreme Court declining to review appeals of lower courts’ decisions banning state “mini-DOMA” laws as a violation of equal protection principles. Benefits and human resources professionals operating companies in the 30 states (and DC) that recognize same-sex marriage all have the same question: what does this mean for their employee benefits plans?

Because of the Windsor decision, the U.S. Department of Labor (DOL) and Internal Revenue Service (IRS) (and most other federal agencies) have indicated that they will consider the term “spouse” to include individuals married to a person of the same sex who were legally married in a state or foreign jurisdiction that recognizes such marriages[2], regardless of whether they reside in a state that does not recognize such marriages (this is known as the “Rule of Celebration“).

For employee health benefits purposes, Windsor is important because it dictates the federal tax treatment and federal rights of employees who receive same-sex spousal benefits.

With respect to fully-insured welfare benefit plans, state law will dictate in all cases. This means that in the 30 states (plus DC) that recognize same-sex marriage, a fully insured health insurance plan that provides benefits to spouses must also offer the same coverage to same-sex spouses.

For self-insured plans, the treatment is not as clear. The Employee Retirement Income Security Act of 1974 (“ERISA”) preempts any state law inasmuch as the state law relates to any benefit plan. This preemption provision does not apply to fully-insured plans, so state law does apply to them (as discussed above). For self-insured plans, there is an argument that a state same-sex marriage law that applies to a self-insured plan would be preempted. However, many practitioners would recommend that an employer in a state that has legalized same-sex marriage that sponsors a self-insured plan consult directly with qualified ERISA counsel to determine whether they can rely on ERISA preemption to avoid being sued by a same-sex married employee. Many practitioners might worry that a law of general applicability like a same-sex marriage law may not be preempted-this would mean that the self-insured plan would be required to offer the same-sex spouse benefits.

For retirement plans like 401(k) plans the IRS has made it clear that the terms “spouse” should be determined using the Rule of Celebration. Again, this means that if an employee and his/her same-sex spouse is married in a jurisdiction that recognizes same-sex marriage, the spouse is recognized for retirement plan purposes regardless of whether the employee lives or works in one of the states that do not recognize same-sex marriage.

For tax purposes, the Rule of Celebration also applies: employees who are married to a same-sex spouse in a jurisdiction that recognizes same-sex marriages do not have to impute income for the spousal coverage for federal tax purposes even if the employee resides in a state that does not recognize same-sex marriage. However, an employee who is legally married to a same-sex spouse but who lives in one of the states that does not legally recognize same-sex marriage, will have to have the value of the benefit for the spousal coverage imputed into the employee’s income for state income tax purposes, unless the spouse qualifies for “dependent” status under state tax law.

Employers that offer same-sex spousal coverage should not require any greater documentation (marriage certificate, etc.) from same-sex couples than they do from opposite-sex couples.

Finally, the IRS has recently released guidance advising employers to assess whether their “spousal” language in all of their employee benefit plans is consistent with the Rule of Celebration. Amendments, to the extent they are required, generally must be completed by December 31, 2014.

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[1] As of October 17, 2014, eight states have recognized same-sex marriage through state legislation (Delaware (July 1, 2013), Hawaii (Dec. 2, 2013), Illinois (June 1, 2014), Minnesota (Aug. 1, 2013), New Hampshire (Jan. 1, 2010), New York (July 24, 2011), Rhode Island (Aug. 1, 2013), Vermont (Sep. 1, 2009). Three states have adopted same-sex marriage by popular vote: Maine (Dec. 29, 2012), Maryland (Jan. 1, 2013), Washington (Dec. 9, 2012). 19 states recognize same-sex marriage as a result of court decisions, with most occurring after the Windsor decision: Arizona (Oct. 17, 2014), California (June 28, 2013), Colorado (Oct. 7, 2014), Connecticut (Nov. 12, 2008), Idaho (Oct. 13, 2014), Indiana (Oct. 6, 2014), Iowa (Apr. 24, 2009), Massachusetts (May 17, 2004), Nevada (Oct. 9, 2014), New Jersey (Oct. 21, 2013), New Mexico (Dec. 19, 2013), North Carolina (Oct. 10, 2014), Oklahoma (Oct. 6, 2014), Oregon (May 19, 2014), Pennsylvania (May 20, 2014), Utah (Oct. 6, 2014), Virginia (Oct. 6, 2014), West Virginia (Oct. 9, 2014), Wisconsin (Oct. 6, 2014). DC recognized same-sex marriage on March 3, 2010.

[2] As of September 21, 2013 the following jurisdictions recognize same-sex marriage: California, Connecticut, Delaware, Iowa, Maine, Maryland, Massachusetts, Minnesota, New Hampshire, New York, Rhode Island, Vermont, Washington and Washington, D.C.

[3] Assumes that same-sex spouse is not a dependent of the employee for federal tax purposes. In all instances of imputation, value of the benefit provided is imputed into the income of the employee. Check state revenue laws for proper imputation methodology. 

 


| We've Been Designated as a Well Workplace!

SIG WELCOA Wellness Award Photo

 

Silberstein Insurance Group is pleased to announce that we have been designated as a Well Workplace at the Small Business Level by the Wellness Council of America (WELCOA).

By achieving this designation, we will be recognized by WELCOA as one of America’s Healthiest Small Companies. SIG is the first benefits consulting firm in the state of Maryland to receive this designation and are one of fewer than 10 small businesses in the country to receive this recognition in 2014.

By successfully meeting a rigorous set of health promotion standards, SIG has demonstrated their willingness to promote and improve the health and well-being of their most valuable asset – our employees. (more…)


| IRS to Amend Cafeteria Plan Regulations to Facilitate Enrollment in Marketplace Coverage

On Thursday, September 18, 2014, the Internal Revenue Service (“IRS”) released Notice 2014-55, which expands the cafeteria plan “change in status” rules to allow plans to offer employees an option to revoke their elections for employer-sponsored health coverage to purchase a qualified health plan through a Health Insurance Marketplace (“Marketplace”).   The notice is effective immediately and will appear in IRB 2014-41, to be published Oct. 6, 2014.

The notice addresses two specific situations in which a plan could allow an employee to revoke a cafeteria plan election (other than a health FSA election): due to enrollment in the Marketplace; and due to a reduction in hours of service. This should be a welcome relief to employers that may have been struggling with how to allow employees to change coverage from under the employer’s plan to a Marketplace or other group health plan. (more…)


| Large Self-Insured Plans Must Register for an HPID by November 5, 2014

As part of the Affordable Care Act’s (“ACA”) Administrative Simplification provision, all “controlling health plans” (defined below) must obtain a 10-digit numeric identifier known as a Health Plan Identifier, or HPID. The HPID is part of a project that federal agencies, health insurers and health care provider groups have been working on for years, as final rules for the HPID requirement were published in the Federal Register on September 5, 2012 (77 FR 54719) (the “Final Rules”).

The Final Rules require health plans to register for an HPID by November 5, 2014 (small health plans have until November 5, 2015 to register). Specifically, all “Controlling Health Plans” must obtain a HPID. The U.S. Department of Health and Human Services (“HHS”) describes a Controlling Health Plan (“CHP”) as a health plan that controls its own business activities, actions, or policies; or is controlled by entities that are not health plans. In plain English, this includes most employer-sponsored self-insured group health plans. (more…)