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Tri-county companies self-insure employee health care coverage

Source: Pacific Coast Business Times | November 25, 2016

Tri-county companies are increasingly funding their employees’ health care coverage directly, which can be more risky but also provide more flexibility and save money.

Employers typically pay health insurance companies monthly or annually to process health care claims and are at the whim of rising premiums. In exchange, the insurers assume the risk.

Those who self-insure often work with a third-party administrator to pay for the cost of care as it’s incurred and take on the risk.

It gives employers more flexibility in crafting their plans and more insight into how they are performing.

“Self-insured companies are ones that want to be in the driver’s seat,” said Mike Ferguson, president and CEO of the Self-Insurance Institute of America. “You can better control the cost and quality of benefits provided to workers and structure the plan to build in certain incentives or disincentives.”

Surging health care costs have stifled the regional economy. Many small business owners reject quality candidates or put off raises to accommodate rising health care premiums.

Premiums for employer-sponsored family plans topped $18,000 this year, according to a September survey from the Kaiser Family Foundation, increasing 20 percent since 2011 and 58 percent since 2006.

The share of mid-sized firms who self-insure jumped nearly 20 percent from 2013 to 2015, a July study by the Employee Benefit Research Institute found.

CIO Solutions, a Goleta-based computer consulting and IT firm, has been partially self-insuring its employees for about a year and will continue to do so through 2017.

The around 60-employee company has a high-deductible plan with Anthem Blue Shield, but it works with a third-party administrator to cover the first $3,000 of expenses after a $250 deductible. Essentially, the employee is getting a lower deductible than Anthem is willing to provide.

“It allowed us to have a better plan for our employees at a lower cost than a standard claim with an insurance company,” said Gibraltar CFO Services President Paul Daniel, who helps CIO navigate its policy. “A higher-quality plan with a lower deductible would otherwise be cost-prohibitive and not provide as nice of a benefit to employees.”

An Amgen spokeswoman said that the biotech giant in Thousand Oaks self-insures but declined to elaborate. Some larger firms like Amgen contract directly with health care providers to create their own networks and negotiate rates with providers.

To hedge the risk, employers often purchase stop-loss coverage to mitigate higher-than-budgeted expenses. Yet, the company would need a strong balance sheet to cover the cost as it can take months to get reimbursed.

Goleta real estate software developer and major tri-county employer Yardi Systems is contemplating self-insuring its employees.

“What is driving self-insurance for a lot of companies, especially ones like the size of Yardi, is that you can create a national program of health care for all your employees,” said Alliant Insurance Services Senior Vice President Jeff Yoos, who is helping Yardi weigh the pros and cons. “You have the flexibility to design a product that meets the needs of an organization.”

Employers are essentially renting a network of providers while eliminating the cost of profit margin and overhead, Yoos added. Especially with large companies, they have data that can accurately project the cost of care and provide unique transparency that facilitates customization.

On top of that, self-insured companies minimize taxes associated with traditional plans, he said.
Oxnard-based berry growers Reiter Affiliated Companies provides health insurance to all of its employees through a traditional insurance provider, but it has also created its own private clinics.

It hired the administrator Healthstat to form the clinics in 2009, the first private clinics for ag workers in the country, the company said. A preventative check-up is only $5 for individual employees. All other visits and prescribed medicine are offered at no cost to the employees.

It provides affordable and quality care to a demographic that traditionally does not get health care, said Yissel Barajas, Reiter’s chief human resources officer.

“We are providing quality care that is efficient and culturally sensitive for our employees,” he said. “We were providing traditional health insurance for years and our employees would have to wait for hours, weeks or even months for an appointment and then work with someone who wouldn’t understand them.”

Previously, its employees would often go to the emergency room, which adds significant unnecessary cost, said Dr. Raymond Lopez, who works at one of the clinics.

“This is delivering health care the way it is supposed to be,” he said.

More companies have been adopting self-insured policies because the Affordable Care Act created so much uncertainty, said Stephanie Hoops, a health care market analyst for Decision Resources Group. Many have weighed the risk, especially if they have a relatively young, healthy group, she said.

“Instead of buying different plans, you can just buy a uniform plan even for coverage across several states,” Hoops said. “It gives you tax benefits and clarity and control. You can see what is spent on marketing and other metrics that you can’t see with traditional providers.”

But it’s not an overnight process, sources said. It’s something to be considered over the long haul and constantly tweaked and modified over time.

One company that Ferguson of the Self-Insurance Institute worked with eliminated any out-of-pocket costs for urgent care visits, he said.

It also found that many of their employees got married and had kids. It looked at three area hospitals that had similar quality outcomes with maternity care but varied significantly in cost, so it provided two years of diapers and wipes to families who went to the lowest-cost hospital, Ferguson said.

“That cost was insignificant compared to the $32,000 difference in hospital care,” he said. “If you believe that your employees are your biggest assets, self-insuring could be the way to go.”

Source: Pacific Coast Business Times