New health insurance choices give Minnesota companies opportunities to manage risk, reduce costs, and control claims.
“The market is opening up for creative solutions,” said Erik Hinz, a Minneapolis-based Sales Executive for The Horton Group, an insurance, employee benefits, and risk advisory firm.
Minnesota companies have traditionally bought insurance from one of only three primary insurers. “Every year at their renewal, companies would have to pick the least-worst option because there were so few options available,” Hinz said. Employers can now choose from five major insurance companies.
Minnesota companies have traditionally bought insurance from Medica, Blue Cross and Blue Shield of Minnesota or HealthPartners. But Aetna and UnitedHealthcare are also in the market now. Companies can seek bids from more insurers or request additional choices from their existing carriers.
“The competition is helping employers get better rates for their employees and making these carriers that were embedded in the market do more than they did in the past,” said Ken Olson, president of The Horton Group’s employee benefits services division. “They’re going to have to sharpen their pencils if they want to keep business.”
Even if they don’t switch insurers, Minnesota employers can work with their existing carriers in new ways. The availability of new vendors and strategies allows the state’s employers to leverage concepts that have been used across the country.
For example, employers that self-insure can build health plans with different vendors instead of getting all services, such as pharmacy benefits management, through a single insurer. “Instead of shopping the entire plan, you get to shop components to get the best vendor,” Olson said.
Companies can choose their insurance based on the level of risk they want to assume, the amount they want to pay, and the claims they want to cover.
For years, only the largest companies self-insured because they were the only businesses big enough to pay employees’ medical costs themselves — particularly those catastrophic claims that could run into the tens of thousands of dollars due to the high costs of advanced medical care and specialty drugs and treatments.
But 17% of employers with 10 to 49 employees offered a self-insured plan in 2018, compared with 10% in 2014, according to a Plan Sponsor article on self-funding health benefits. Small businesses have found that they can pay only as much in claims as they can afford by protecting themselves with stop-loss insurance, which kicks in when an individual claim or the company’s collective responsibilities exceed predetermined limits.
Self-insurance could work for about 70% of companies that have 25 or more employees and adequate cash flow, according to a Business Benefits Group blog post that compares fully-insured plans versus self-insured plans. “However, self-insured plans also work well for some smaller businesses as well. With an appropriate level of stop-loss, smaller businesses can safely take advantage of self-insured plans.”
Minnesota companies that want to transfer all of their risk to an insurance carrier can still fully insure, perhaps at a better rate because of the increased competition for their business. But employers also can explore new self-funding options and stop-loss coverage arrangements, Hinz said.
Companies often assume that fully-insured plans are cost effective because the insurer absorbs all of the risks. But that isn’t necessarily true.
Fully-insured plans can be more expensive because insurers set premiums based upon everyone insured, including people not covered by the employer. Therefore, the employer may pay higher premiums than the health of their employees and dependents would warrant and the claims that they file would justify.
Self-insured plans usually are cheaper for employers than fully-insured plans because they don’t have the same taxes and fees required by federal regulations.
Nationwide, 61% of covered workers are in a plan that is completely or partially funded, according to the Kaiser Family Foundation’s 2018 Employer Health Benefits Survey. Twenty percent of those covered workers were employed at organizations with 50 to 199 workers, and 50% had employers with 200 to 999 workers.
Minnesota employers may be able to reduce their costs through self-insurance because they would only pay for the care that their employers and dependents receive, Hinz said. They also could avoid fees and regulations that are specific to fully-insured plans.
Businesses do not have any insight into the care that they pay for with full-insurance plans. Data like conditions treated, medications prescribed, and providers used stay with the insurer.
With self-insurance, employers can see what claims are paid, how much they cost and who is paid. So, although the patient remains anonymous, an employer can determine if they are providing the proper coverage and receiving care from the right providers. They can then adjust their coverage terms and provider networks to get the best value from the highest-quality providers.
Minnesota companies that self-insure also can explore ways to prevent claims, or at least minimize their costs, by identifying key challenges and medical issues through claims data, Hinz said. If, for example, the employer finds that many claims could be avoided through preventative measures, then they could incentivize better health through wellness programs or other initiatives that could lower overall costs.
Once a captive market, the Minnesota health insurance marketplace is now ripe with possibility. Employers can manage risk, reduce costs and control claims by exploring the new opportunities that competition has brought.
Olson said, “The cost of healthcare continues to rise, and the employers that are looking to create the best benefits packages for attracting and retaining talent need to leverage this properly.”
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