Monday, August 24, 2009

More Inconvenient Health Care Facts: The Role of Self Insured Employers

I have previously mentioned that Dartmouth College was self-insured in regard to health care costs of its employees, and that this creates a situation wherein the College not only has the incentive to manage its employees' health costs but also has tremendous ability to do so.

In discussing this with people, I am struck by how many did not realize the extent of self insuring employers. So here is a document that gives the facts: Health Plan Differences: Fully-Insured vs. Self-Insured, from the Employee Benefit Research Institute.

As I suspected (ah, theory does help one predict accurately!) the extent of self insurance among employers is quite great. Overall, 55% of workers "with health insurance" were covered by a self-insuring employer in 2008. Even more telling, 89% of workers in firms with more than 5000 employees were covered through a self-insurance plan.

Most companies that self insure will still use a Third Party Administrator (TPA) -- Dartmouth uses Anthem BC/BS -- to handle the administration of the health plan. Besides processing all the paper, this also includes the important role of negotiating rates with medical service providers. Self insurance simply means that the company will pay all of its employees' health care bills -- they just get passed on by the TPA. (Most employees, however, probably think that they are being insured by the TPA, and when there are issues with nonpayment, etc., they will blame the TPA.)

How does the great extent of self insurance fit into everyone's perception of the greedy, rapacious role of insurance companies? They are not even insuring most workers!! And, the Third Party Administrator market is a very competitive one. A company can request bids from many TPAs and take the best one. And the employer can design its health care plans as best fit its employees, and then just tell the TPA to administer it. That is, as I have repeatedly argued, the employers have all the incentive and ability to manage their health care cost. The problem is NOT with insurance companies. This is one of the myths being consistently pushed by those who want reform at any cost.


Anonymous said...
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reefnetter said...

Hi Bob, I was reading some of your articles on health insurance; I did not realize this was a big subject for you lately. I would ask how you think folks would react if different groups of people negotiated different prices for basic food commodities at the grocery store, big business and government employees paying much less than the poor guy who has a small business and cannot even afford insurance.

This was in your article......
Besides processing all the paper, this also includes the important role of negotiating rates with medical service providers.

How can different rates for this important commodity be justified?