What is an employer-sponsored, or self-funded, plan?

Note: The below information refers only to a ClaimLinx Simple Option Solution plan. There are other types of self-funded plans that these details would not apply to. 

As our members know, the ClaimLinx SOS plan uses a different type of strategy for providing the health insurance benefits employees need. It combines two types of insurance coverage: a traditional insurance plan with a major carrier for primary coverage and a self-funded Medical Expense Reimbursement Plan (MERP) for secondary coverage.

See how these two levels of coverage work together so an employer can provide better benefits at a lower cost. But what exactly is a self-funded plan and how does it make benefits less expensive for the company?

A self-funded plan, also referred to as an employer-sponsored plan, is one in which a company pays directly for medical services.

In the case of a ClaimLinx SOS plan, an employer pays only for qualifying services according to a MERP determined at the beginning of the plan. Following its effective date, all medical claims are processed by ClaimLinx as a third party administrator and are paid with funds directly from the company.

Using an employer-sponsored plan allows companies to continue to provide benefits at a lower cost because they are no longer prepaying for services to an insurance company in the form of premiums. Insurance carriers charge for a plan under the assumption that every employee will be using large amounts of services. In most cases, that just is not true.

Instead employers can purchase a high deductible plan and pair that with a MERP. That way they are only paying for services actually rendered to employees.

In addition, because ClaimLinx provides a full customized schedule of benefits with a member ID card, members should not be required to pay up front for services and wait for a reimbursement (excepting special circumstances). Claims are processed and payment is sent at a later date directly to providers. This means members should experience the same conveniences as with a traditional insurance plan.

In its simplest terms employer-sponsored, or self-funded, plans are those in which qualifying medical services are paid by the company.

All of this is made possible using a 60-year-old tax code that allows companies to deduct medical expenses for its employees. What it means for employees, though is that their employer can provide the benefits they need at a cost the business can afford.

 

What are copays, deductibles and coinsurance?

It’s not always clear exactly what your health insurance plan covers when fees and ending costs can feel like they’re hidden behind complex industry terms. So tackling understanding what they mean is important to knowing and using your benefits.

The below terms are all forms of “cost-sharing,” which is when medical services are paid by both the member and the health plan.

Copay — A fixed amount a person pays for qualifying types of services, such as office visits, specialist visits, prescription drugs or other procedures. For example, a member may have a $25 copay for an office visit with a primary care physician and a $40 copay for a specialist. All copays are fixed and detailed in the summary of benefits at the beginning of the plan and can be charged before and/or after a person has reached his or her deductible.

Deductible — The amount you pay for covered services before the insurance company begins to pay. For example, if you have a $2,000 deductible you will pay 100 percent of all eligible expenses until all the bills total $2,000. Once the deductible is paid, you will owe only any copays or remaining coinsurance for covered services. See Also: an article on embedded vs non-embedded deductibles.

Coinsurance — Paid after a person has met his or her deductible, it is a percentage of the allowed amount for services. For example, you have a coinsurance of 20% and the allowed amount for lab work is $100. If you have paid your deductible, you will owe 20% of the allowed amount of $100, or $20. If you have not paid your deductible, you owe the full amount of $100. Not all plans have coinsurance.

It’s important to be sure you understand your benefits when you receive your plan documents. All health insurance plans come with a summary of benefits, which includes informations on all copays, deductible and/or coinsurance. If you have additional questions about your plan, it’s best to contact the health insurance company directly.

You may always find contact information on your member ID card.

What is the difference between primary and secondary coverage?

Note: The below information refers only to a ClaimLinx Simple Option Solution plan. There are other types of secondary coverage that are similar, but can vary in detail.

The key to a ClaimLinx SOS plan is the combination of both primary and secondary coverage. It makes the plan more affordable for a business without sacrificing benefits, such as raising deductibles or copays.

In order to use these benefits, it’s important to understand the difference between primary and secondary coverage.

Primary Coverage — Also referred to as your Primary Carrier, this is the coverage from a major medical insurance company. Examples are Anthem, Humana, Cigna, Blue Cross Blue Shield, National General, Harvard Pilgrim and many more.

Members should refer to the primary carrier for their provider network and any coverage limitations. Issues with pre-authorization or required referrals all must be dealt with the primary insurance carrier.

Essentially, the primary coverage is the initial gatekeeper; all services must be approved and/or covered as a part of this plan before a member can receive any additional benefits from their secondary coverage.

Secondary Coverage — The Medical Expense Reimbursement Plan set up for the company that includes additional benefits (copays and/or lower deductible).  This plan is self-funded by the company, but is administered by ClaimLinx.

This means claims are processed first by the primary carrier and then are processed by ClaimLinx for any additional benefit. Click here to see the full process. Claims are processed within 10-15 business days of their receipt, though any missing or pending information can cause delays.

Members can view an Explanation of Benefits (EOB) for their claim on the member portal once the claim has been processed.

For secondary coverage, ClaimLinx follows all coverage or network decisions made by the primary carrier. For example, if a service is denied by the primary carrier, it will also be denied for secondary coverage with ClaimLinx. The same is true for if a provider is billed as in-network or out-of-network.

That is why we encourage all of our members to verify with their primary carrier that a service or procedure is covered before going to the provider.

Click here to see how to file a medical claim if your provider is not familiar with filing for secondary coverage. Contact the claims department with questions about the process or a specific claim at help@claimlinx.com.

HSA vs HRA vs MERP

If there is one thing rising costs can provide, it’s creativity. Business owners all over are taking this opportunity to reevaluate not only from whom they purchase their health insurance, but also how they purchase it. But what are the pros and cons of all these different solutions?

First, some quick definitions:

  • HSA (Health Savings Account) – A tax-deductible savings account for medical expenses only. Contributions can be made by the plan subscriber or by an employer.
  • HRA (Health Reimbursement Arrangement or Account) – An agreement where an employer reimburses an employee for qualified medical expenses not covered on a company’s standard insurance plan.
  • MERP (Medical Expense Reimbursement Plan) – An arrangement where an employer pays providers directly for qualified medical expenses not covered on a company’s insurance plan.

All these alternatives have one big thing in common: they allow businesses to raise the deductible on their group health insurance plan. It’s the fastest way to lower that initial sticker price on the company health plan while still providing some sort of benefit.

So what’s the difference between them?

HSAs seem like the easiest way to provide cash on hand for employees. But these plans often require employees to invest in the account as well employers, and once the funds are in the account they can only be used for medical expenses. For most, estimating how much to put into the account is tricky business. Invest too much and employees feel the account is a waste, but invest too little and the account isn’t serving its purpose, which is to provide tax-free dollars to improve the plan benefit.

So perhaps you move onto an HRA – a seemingly simple way to give employees company dollars for medical services rendered. Many employees never ending up using this benefit though. For many, the filing process for reimbursement seems complicated and arduous. Others simply forget the benefit is there because of the extra processing requirements. So at the end of the day, employees are really only experiencing the high deductible health plan.

Finally moving onto a comprehensive MERP. These plans can enable employees to get back that feeling of full coverage. Because the employer is paying the provider directly for services, the employee does not have to pay for them upfront. There is still a second level of processing for the medical claims but it is not left up to the employee exclusively to sift through paperwork and requirements. All of this is done through an outside third party administrator.

All in all, there are a lot of options out there for health insurance now. That’s why it’s important you have someone to help you look at and weigh all the options.

 

What is the difference between an embedded and non-embedded deductible?

A deductible is the amount of money that must be paid for covered services before the health insurance company begins paying for expenses. There are two types of deductibles, but the difference matters only for plans covering more than one individual.

The difference has to do with the amount an individual or a “family” must reach before the insurance company begins paying for expenses. Note: in this case a family can apply to a member and spouse, member and children or member, spouse and children.

Embedded Deductible — Each family member has an individual deductible in addition to the overall family deductible. Meaning if an individual in the family reaches his or her deductible before the family deductible is reached, his or her services will be paid by the insurance company.

Non-Embedded Deductible — There is no individual deductible. So the overall family deductible must be reached, either by an individual or by the family, in order for the insurance company to pay for services.

In the past, non-embedded deductibles have been an issue especially for small families, such as a member and spouse because they have fewer people to reach the high deductible.

With the passage of the Affordable Care Act, there were changes to the standards regarding out of pocket maximums that affected how insurance companies structure plan deductibles. All ACA compliant plans must have embedded out of pocket maximums. As a result, most ACA compliant plans now have embedded deductibles.

Also as a part of the law, all family deductibles must be no more than double the individual deductible rate. For example, if the individual deductible is $3,000, the family deductible can be no more than $6,000. Both of these measures were an effort to alleviate the financial stress on smaller families.

However, these rules do not apply to the self-funded Medical Expense Reimbursement Plans ClaimLinx clients use for their benefits, so it is possible our members still have a non-embedded or higher family deductible. Always refer to your summary of benefits for more information regarding your own deductible.