My employer has become self-insured. Do I care?

In My Humble Opinion
1

My company has just announced that as of January, they will be self-insured in terms of the health insurance offered. From an end-user point of view, they are assuring us that nothing will change. The plan will be administered by Blue Cross/Blue Shield (our previous insurer) and the rates and coverage have not changed.

So… do I care? Are there any caveats I should know about? They’ve touted this as something a lot of companies do, and I have no reason to think that they want to offer less-than-great health care, but as someone who uses their insurance, I want to be informed.

2

The company I work for has been self-insuring for over 20 years. It has no effect on your benefits or coverage. Administration is still handled by a health insurer so you won’t see any material change in how the plan works or pays.

3

Well… from what I know of things, usually it’s not a problem, BUT—

If someone in the company has a major, catastrophic-level claim it could impact all of you - that would be, say, an employee or covered family member with cancer, or needing an organ transplant, or a major burn or equivalent trauma, or someone has a kid born with a really bad birth defect. In the past, this has resulted in rising (one might say skyrocketing) premiums for everyone in the insurance pool and/or the self-insurance collapsing. I’m not sure what safety nets, if any, are present for self-insured companies these days. It’s not a common problem, but it does happen.

Another to watch for is perverse incentives. As an example, one time I was covered under a self-insured employer the policy would only cover pregnancies with complications. Regular, uneventful labor and delivery was not covered, not one penny. Suddenly, all the women having babies under that policy were having “complications” and winding up with cesareans, which were covered in full. Naw… couldn’t possibly be a connection, must be coincidence, right?

So yeah, there can be pitfalls. If the company is self-insured then everything covered or not covered really is the employer’s choice, and since the employer is not an expert in determining what’s really most likely or cost-effective over time, well, it’s not always ideal. It might be, especially if the company did some homework. The insurance company devoted full time employees to analysing risks regarding health care coverage, it’s unlikely your company employs actuaries for this purpose.

So… hard to say. Like I said, it’s usually OK. In general, the bigger the company the better this will work out (because the larger the pool of covered lives the more the risk is spread out). If General Motors self-insures I wouldn’t worry too much. If a 100 person company does, huh, I’m not so comfortable with that.

4

OK, then, in this context, just what the hell does “self-insured” mean? As opposed to, say, NOT self insured.

5

It means that the employer pays for all of the claims of the employees (subject to deductibles) as opposed to the insurance company paying them.

As with most employer based health insurance plans, the employer covers a significant portion of the premiums. In a self insurance situation, the employer collects the employees portion of the premium, holds it, and then pays out on all of the claims generated by the employees. The insurance company acts purely as the administrator of the plan, determining which claims are covered, paying the health care professionals, etc. The insurance company collects a fee for administering the program, but the claims are covered by the employer.

6

What th…How the fuck is that even legal??? So, just go have the baby in the bathroom because we’re not paying for no high-falutin’ hospital or anything.
Goddamn pregnant leeches.

I mean, how is that even possible??? :eek::eek::eek::eek::eek::eek::eek:

7

There are some differences in that self-insured plans are exempt from state laws regulating medical insurance providers under ERISA:

Whether or not this matters to you I have no idea.

8

I would guess that a self-insured company, particularly a smaller one, would have to carry some sort of insurance policy as a backup, to kick in in the event of catastrophic claims that would otherwise bankrupt the system.

9

My small school district was self insured for a couple of years. It was great until three employees came down with serious illnesses that required prolonged hospital stays, organ transplants, and stem cell treatments. The school went through all their reserves and had to take money from other accounts.

It never affected me or my claims, but the school went back to insurance companies after that. When it works, it’s good, but a couple of expensive illnesses can really hurt.

10

This is nothing new. In the mid-80s my employer was self insured. As described in the OP, the coverage was the same, handling the claims was the same, in fact, if I had not been told the company was self-insured, I would not have known.

Athena, there is only thing you should worry about, and that is only if you hold the company stock or receive stock options as part of your compensation. That would be that an unusually large number of expensive claims in a short period of time could affect the company’s financial situation, which could affect the price of the stock and, likewise, your holdings. If you do have such financial interest in the company, however, you will also reap the benefits of the lower costs of providing insurance to the employees. As with most things, there is reward to taking risks, particularly if managed correctly.

As for Broomstick’s comment:

This really has nothing to do with being self-insured. Years ago, the philosophy of many company-provided health insurance programs (whether or not they were self-insured) was the insurance was to cover catastrophic unexpected expenses. While, perhaps pregnancy may be unexpected (although it is a natural result of certain choices), childbirth is not. In addition, years ago hospital costs for vaginal childbirth were not that high (less than $2000 in 1992). Certainly an amount that someone with a decent job could afford with a little planning (and, jobs that provided health insurance were considered decent jobs back then). Of course, today having a child in the hospital costs more than a new car, so even if you were given 6 years advance notice, it would be tough to save up for it.

11

Insurance didn’t used to have to cover pregnancies at all. So what they are saying is that their policy doesn’t have pregnancy coverage, but they will cover a medical emergency. So if the pregnancy becomes a medical emergency, it’s covered.

12

It matters if you have a dispute. ERISA preempts all state insurance regulations and protections, and your remedies under ERISA are limited.

13

I think he was saying how is it legal to mis-code as a medical emergency.

And the question comes back to proving that it wasn’t, which I’m not so sure that a self-insured company and their TPA would necessarily have the review infrastructure to see if that was the case or not.

14

A good thing as your company is making sound financial decisions. This could save them money in the long run.

15

Thanks for all the input; it pretty much bears out what I’d found with my own research.

We are not a tiny company but not huge either (~1200 employees or so). So I think we’re large enough to be able to withstand a fair bit of coverage, even if we do get some expensive claims.

We are public, and we do have stock plans as part of our compensation, so good to know. But as you said, there’s two sides to that story, and there are SO many things that could affect the stock price that this is just one more drop in the bucket. So far, the company has been sound, so I’m gonna assume they’ve done their homework and the risk/reward balance is as good as it can be.

16

Or lose them money. Whether it’s a sound financial decision depends on many things. A blanket statement that any company switching to becoming self-insured is a “making sound financial decisions” is ludicrous.

17

1200 employees is pretty small actually when thinking about a risk pool. 1 or 2 catastrophic claims and it could have a significant impact on how much you pay.

18

“Self-insured” is just another way of saying “not insured”. There is no insurance. The company is paying health care costs directly. If they can or if they want to. Both of those are not always true.

In ideal world, nothing changes. Most people don’t live in an ideal world.

19

No, I’m a woman, and I’ve never been pregnant. I don’t see how pregnancy cannot be covered under standard medical insurance. It’s a hospital procedure, fairly major, and any sort of hospitalization can bankrupt a person without insurance coverage quick these days.

20

In some sense, a pregnancy can be seen as an “elective” condition. You can save up for it and go through with it once you’ve saved up enough money. Even if it’s a surprise pregnancy, you still have 9 months to save up to help defray the costs. You can also use non-traditional methods to deliver the baby, such as using a midwife or finding a hospital which doesn’t have expensive birthing suite. I’m pretty sure that even if you didn’t have pregnancy coverage, serious life-threatening delivery complications would be covered under your normal medical coverage.

At one point I was in a contracting company with some friends and we were able to save money on our group insurance by not having the pregnancy rider. All of us knew we weren’t having anymore kids, so we could save money by not having that added to our premiums.