Medical Underwriting for Self-Funded Plans: A Pain or a Good Idea?

One of our employer clients recently got a 33% rate increase for their fully-insured medical plan. The group has about 60 eligible employees, so we weren’t able to get much information on the underlying causes for the rate increase.

The client wanted to explore a variety of options, self-funding being one of them. With no claims data available and no idea what was behind the steep rate hike, jumping into a self-funded plan might seem a little scary.  There are some companies that will set up “level funded” self-insured plans without any claims or health data.  However, knowing there had to be something behind that 33% rate increase, we opted to go with a company that asks health questions of each employee, a process otherwise known as medical underwriting.

Getting employees to answer health questions for themselves and their covered dependents can be challenging. Employees are sometimes concerned about disclosing their personal information, but we were able to make them comfortable with the process.

We set up a secure online enrollment system, and the employees began logging in. About halfway through the enrollment, I got a call from the TPA telling me we needed to pull the plug.  Apparently there were a couple of very significant health issues in the covered group, and moving to a self-funded plan made absolutely no sense.

We closed the online enrollment portal and shifted gears to a lower cost fully insured plan. Despite the fact that the self-funded plan didn’t work out, the process was useful.  The HR Director and I were able to confidently tell the partners that we explored every option, including the self-insured approach, and there was no question that maintaining a fully insured plan was in their best interest.  Had we used a company that didn’t require health questions, the group might have been tempted to make a change that didn’t make sense.

In this case, medical underwriting was a valuable part of the analysis.

If you’d like to talk about creative ways to control your health care costs, give us a call at (866) 724-0008 or click the link below.

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