By Chris Moore Head of Major Accounts at Simplyhealth
Since their introduction in the early 1980s self funded health plans have made a growing impression on the funding landscape of healthcare benefits. Figures from industry analysts Laing & Buisson show that these funding arrangements now provide cover for 723,000 registrations, representing a doubling of registrations since the year 2000. They are a very important sector of the company paid market with an estimated 24% of registrations now administered through a self funded health plan.
There was a halt to the growth of self funded health plans in 2009, presumably because following the credit crunch there was a drive for premium certainty. Growth in the self funded market quickly reasserted itself in 2010, arguably as a result of the announced increase in Insurance Premium Tax (IPT) from 5% to 6% in January 2011. As self funded health plans are a funding mechanism not subject to IPT it is impossible to ignore the debate over the impact that increases to IPT might have for the self funded market. There is a sentiment expressed by many, including those who attended the forum, that an increase in IPT to 10% would prove a tipping point to precipitate an exodus from insurance to self funded health plans.
Although to see self funded health plans only as a funding mechanism that isn’t subject to IPT is a blinkered view. It is my experience that a well considered, thoughtfully introduced, self funded health plan is more than a product option; it represents a change in philosophy for the client. It is a solution that is completely owned by that client. A good third party administrator, often working with an intermediary partner, will consult, advise and support to ensure that the funding model fully meets the client’s objectives. It is the scrutiny and debate over the plan’s objectives and an understanding of how these fit into the corporate culture that makes each plan potentially unique. To put it crudely, a client adopting a self funded health scheme can’t blame the insurer for the benefit structure and the plan operation. This makes it important for the client to choose a self funded administrator that is experienced and credible, providing an extension of the client’s human resources department.
There is debate in the market over the scale of client that suits this kind of arrangement. There is no simple answer because the nature of a self funded health plan provides for full flexibility. Simplyhealth has administered a small client scheme that paid benefits solely for IVF treatments, whilst a typical private medical insurance policy provided the other benefits. Whatever they choose to cover, most clients look for certainty over the size of the claims fund. In our experience, a scheme with more than 500 members minimises claims volatility and access to three years prior claims experience provides even greater certainty. It is quite common for clients to buy stop loss insurance to mitigate open ended risk.
In conclusion, selecting a self funded health plan means that clients can choose benefits with absolute discretion. The plan is in the client’s name and its ownership is clear. Financially, third party costs for the administration of the scheme are clear and transparent and the arrangement can be more tax efficient than private medical insurance.
As a leading provider of self funded health plans Simplyhealth would be delighted to discuss in more detail how this option can benefit your clients. Simply give us a call on 0800 294 7303 and we can arrange an appointment to discuss your client’s needs.
Chris Moore has almost 20 years’ experience in managing the self funded health plans of some of the UK’s leading brands. Chris and his team are available to discuss how self funded health plans canprovide an alternative solution to traditional insurance.