Traditional insurance bundles remain a competitive pharmacy benefits option for employers. It’s a simple, one-size-fits-most method for employee coverage; however, these plans are not always meant to benefit the employer. There are several drawbacks to fully-insured plans, including data limitations, lack of customization, and most importantly, overspending.
Before you consider a traditional insurance plan for its simplicity, let’s break down the major risks of a fully-insured model:
1. Fully-Insured Plans Limit Data Access
Data can help companies predict trends and make decisions to help improve their businesses. Claims data can give employers insights into the full scope of their employees’ health. Employers that opt for a traditional, fully-insured plan do not have access to claims data. Instead, the insurance company owns all employee data and rarely gives employers a glimpse of its valuable insights.
On the other hand, self-funded employers own all employee insurance data for full transparency. This allows employers to identify prescription trends and high-risk individuals in order to develop customized plans and ultimately lower plan spending. Data transparency allows the employer to receive insights into their benefits scope and react quickly to plan performance. Employee data access comes with a high-stake responsibility – HR and security leaders should educate themselves on Protected Health Information (PHI) and HIPAA compliance regulations to ensure confidentiality is maintained.
2. Fully-Insured Plans are Not Flexible
Most insurance companies, namely BUCAs (Blue Cross, United, Cigna, Aetna), offer standardized insurance solutions, limiting employers to cookie-cutter plan designs that are not specific to their needs. These traditional plans not only limit coverage for employees, but they have state regulations and administrative costs built in as an added disadvantage for the employer.
Self-funded insurance plans allow employers to design customized benefits packages that will better serve their employees. With these plans, business owners can leverage employee data to identify specific features that will benefit their employees based on their needs. Additionally, self-insured plans allow more flexibility on a claims administrator which can be managed by a third-party administrator (TPA) or insurance company.
3. Fully-Insured Plans are a Money Grab
In a traditional insurance plan, employers pay a set monthly premium to cover employee prescription claims plus the insurance company’s overhead and administrative costs. Employers are obligated to pay this set rate no matter the number or type of claims that year. So, what happens to the money that is not spent on actual claims? It goes back to the insurance company. This type of fully-insured coverage often leaves employers paying thousands of wasted dollars.
Insurance companies are built to profit off of employers seeking protection from pharmaceutical risk, but fortunately, there’s a more affordable option. Self-funded plans allow employers to only pay for the expected employee claims. In this type of plan, an employer would set aside a specific amount to cover variable costs (claims), as well as fixed costs such as administrative fees and stop-loss insurance. Employers will want to look into purchasing stop-loss insurance in case there’s a higher risk for a large specialty claim.
Self-funded plans also allow the employer to avoid insurance overhead costs, state premium taxes, and insurance company profits.
These are just a few of the limitations to traditional insurance. Employers can find more benefits and savings by opting for a self-funded insurance strategy over a fully-insured plan. Learn how to fully optimize your self-funded plan at www.rxpharmacyassurance.com.
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