A thriving, successful company that skewed young with its demographics weighed the benefits of continuing with its traditional insurance plan, or devising a self-funded program that might better address the needs of its workforce in terms of cost and flexibility.
Most companies rely on traditional insurance plans, paying a monthly premium in return for full-service coverage from providers who are required to follow stringent regulation and oversight from the U.S. government. For Allyis, that meant significant yearly premium increases on top of $65,000 per month premiums.
“We took a hard look at costs for 2006,” said Mark Hewitt, Allyis’ director of human resources. “We were facing a significant challenge in terms of cost increases, so we solicited input and proposals from multiple agents representing multiple carriers, to see if there were better options available to us,” Hewitt added.
One option was a flexible self-funded health insurance program. The Allyis workforce is relatively young – largely child-bearing age – and not likely to be facing major health issues. However, it was a major factor to consider for self-funding when costs for coverage of a premature baby, which can be astronomical, are taken into account.
Allyis requested from its insurance carrier in 2006 a summary of the claims that had been paid on behalf of Allyis employees. The insurance company balked at revealing its closely guarded numbers, and was unwilling to share this information. However, because of Allyis’ request, at the end of those early negotiations the carrier had lowered its price so significantly that Allyis reaped a four-percent decrease in cost for 2007 insurance.
That negotiation unearthed valuable information that ultimately would help build the case for self-insurance, since Allyis determined that its carrier must be enjoying a large profit margin.
Further inquiry revealed that self-funded insurance would offer Allyis the chance to allow more benefit options for medical, dental and vision care than a traditional carrier, including offering more coverage and plan flexibility than what a traditional insurance plan can offer.
To enact a self-insurance plan, Allyis would need to contract with a broker. The broker’s role is to review the plan and act as an advocate for Allyis employees should they have a problem with the company’s third-party administrator (TPA). The broker also tracks all the statistical information around the self-funded insurance plan. This helps the company determine what is required in order to protect and control its healthcare costs and to help the company establish the proper healthcare fund to cover the possibility of the plan exceeding its limits. For these services, a fee is paid monthly for every employee.
Ultimately, Allyis opted for self-insurance. “Once we were satisfied with the numbers and analytics comparing traditional insurance and self-insurance, the answer was clear,” said Hewitt.
Allyis retained the services of a broker, and now offers its employees two plans for insurance with different deductibles. The first includes a monthly employee contribution of $35 a month; zero deductible, $15/visit co-pay, with 100 percent of care bills covered.
The second offers a zero monthly fee, a $200 deductible, $20/visit co-pay, with 80 percent coverage for lab work and/or hospital stays.
A childcare reimbursement program is also offered to all Allyis employees, with two options. Option one offers a $525 allocation toward licensed daycare, with option two providing $250 toward licensed daycare, and $275 applied toward dependent coverage, which is the self-insurance healthcare premium for dependents.
Another consideration Allyis implemented was stop-loss insurance. This is to prevent the company from a situation that would dictate paying enormous medical bills in the event that an insured individual contracted lymphoma, for example, or other illness requiring long-term coverage, or the aforementioned premature-baby scenario, which can incur costs of $300,000 or more.
The Allyis plan offers two forms of stop-loss insurance. One provides a cap on individual claims, whereby Allyis provides insurance that caps an individual maximum claim at $30,000. After it pays a claim to this amount, the stop-loss carrier picks up the remainder of the bill.
The second option provides stop-loss for the total plan. When expenses exceed $600,000 for aggregate claims, the company’s stop-loss carrier picks up all additional claims.
Self-funded insurance allows Allyis more flexibility around payment of the services its employees need. The company can override the limits set by traditional insurance providers and make decisions to pay bills, if desired. For instance, many insurance carriers will not pay for acupuncture or other alternative care. Allyis is able to decide and require its TPA to cover those expenses it deems allowable.
Allyis selected Aetna as its TPA. Allyis employees select providers from Aetna’s preferred provider network. For each visit to a doctor or clinic, the employee presents an Aetna card to the provider receiving, in essence, all the benefits of the traditional insurance program without any of the overhead associated with the program. Aetna in turn covers the medical expenses, and later bills Allyis for the actual services the physician or clinic performed for the employee. With a traditional insurance program, Allyis would simply pay a monthly premium and would not ever know the actual amounts spent on healthcare or provider profits for those services. Due to federal HIPPA regulations, Allyis cannot legally view individual claims.
Allyis has subsequently reviewed its self-funded plan’s performance, and though claim costs are running higher than what was statistically predicted by the actuary, company savings were over $200,000 for the fiscal year—compared to what costs would have been had it remained with its former traditional insurance carrier.
Its employees are Allyis’ biggest asset. It can now offer significant flexibility to them with options that meet the widest range of the company’s employee requirements. The spectrum of coverage the company can provide is broader than with traditional insurance, and it can rest easy knowing it’s providing solid healthcare coverage and meeting its own corporate philosophy and community objectives.
Visit www.allyis.com.
