Alternate Funding Arrangements
Health insurance offered in New Jersey is segmented into three markets based on an employerâ€™s full-time equivalent (FTE) employees. Small group is the market for employers with under 50 FTE, mid-size is between 51 and 99 FTE, and large group for employers with 100 or more FTE. Employers with fewer than 500 eligible employees traditionally chose a fully-insured health insurance plan based on a spreadsheet prepared by their broker. This method has been successful for many years when evaluating health insurance options, but in todayâ€™s business climate, your organization must make every effort to explore all available options, including alternative funding arrangements (alt-funding).
As a purchaser alt-funding may look and feel like a fully-insured health plan, however the mechanics of the administration and funding are different. Your consumer experience will be the same as a fully-insured plan in that you will have access to customer service, your claims will be paid based on plan provisions, and you will be provided education materials for your employees and their dependents.
With a fully-insured plan, the employer pays their premium each month, regardless of their actual health claims, and then receive a renewal (usually an increase) every year. With alt-funding, the employer still pays a fixed monthly amount each month but if their claims are below expectations, they get to participate in the windfall. There are protections in place so the employer doesnâ€™t have to pay more than the fixed amount. All products available have reinsurance built into the plan cost that cover both specific per member claims and aggregate claims. In addition to the reinsurance, a safety net is built into the cost should an organization decide to move away from the insurance carrier/TPA that will cover the cost for claims incurred during the plan year, and have not been paid when the plan year ends.
The primary administrative difference between fully-insured and alt-funding arrangements is that fully insured plans are subject to New Jersey state insurance laws and alt-funding plans are not, they must comply with federal laws. Another considerable administrative difference between fully-insured and alt-funding is that fully-insured health plans include Healthcare Reform fees in the premium and the insurance carrier is responsible for reporting and rendering payment of any applicable fees. With alt-funding, the employer is responsible for submitting any reporting requirements and rendering payment of any applicable fees.
Products are available that will provide you with masked reporting of your plans performance to help create a strategy in curbing rising health care costs. Another great attribute of some products is the sharing of any claims surplus should a plan perform better than expected. Any claims surplus that is realized goes back to the company and is not required to be distributed to covered members of the plan.
Be certain that both you and your insurance broker/consultant are performing due diligence in evaluating the available health insurance products, including alt-funding arrangements, to ensure both the company, and the covered lives are getting the most out of your health care dollars.
For more information regarding Employee Benefits for your organization, email Billy MacNair, Vice President at Brown & Brown Benefit Advisors at firstname.lastname@example.org.