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MEDICAL TOURISM
What is Self-funded Healthcare
&
Amazingly many overseas hospitals don’t
know what self funded health care is (sometimes
referred to as Self Funding). Every hospital
should, because self funded healthcare is one of
the few ways for hospitals to tap into the
patient pool for Americans that already have
health insurance coverage, but may choose to
go overseas for healthcare rather than receive it
domestically in the U.S. Understanding how
Self Funded Health Care fits into Medical
Tourism is a key factor in the growth of this
industry.
U.S. Employers juggling the high costs of
healthcare are always looking for solutions,
flexibility on benefit coverage, and ways to
reduce the cost of their healthcare. Partial Self
Funding/Self Insurance with Stop Loss Coverage
is an attractive alternative to employers utilizing
a fully insured plan such as BCBS, CIGNA,
AETNA, Humana or United HealthCare.
What is a Self-Funded / Self-Insured
Plan?
A partially self-insured, or self-funded plan,
is one in which the employer assumes a portion
of the financial risk in providing health care
benefits to it’s employees. The employer
chooses a plan of benefits, which may be similar
to or identical to the employer’s current fully
insured plan. Rather than obtain medical
coverage from an insurance carrier (such as
BCBS or Aetna), the employer elects to fund
the risk of medical claims up to a certain level
where a Reinsurance or Stop Loss Insurance
carrier is brought in. For larger employers, no
reinsurance or stop loss insurance is brought in
and the employer is fully 100% at risk for all
medical claims.
54 DECEMBER 2007
How does Medical Tourism fit into it?
Stop Loss or Reinsurance is designed to limit
the employer’s risk of self funding their
healthcare and limits the losses for medical
claims to a specified amount, to ensure that
large, or unanticipated claims, do not upset the
financial integrity of the self-funded plan. The
level of risk an employer takes on with self
funding and the point at which a reinsurance or
stop loss insurance kicks in is in direct relation
to the employer’s size, nature of their business,
past medical claims experience and tolerance
for risk.
Normally, in self funded arrangements, a Third
party administrator (TPA) administers the plan.
A TPA performs the same functions that a fully
insured carrier would. A TPA’s responsibility
includes maintaining eligibility, customer
service, managing a network of contracted
providers, adjudicating and paying claims,
managing and negotiating claims, preparing
claim reports, plus arranging for managed care
services such as network access and case
management.
Self Funding – A Comparison to Fully
Insured Plans
Everything that is provided in a fully insured
health plan is duplicated in the self funded health
plan. (Everything that the fully insured carrier
offers in a fully insured plan, is offered in the
self funded plan – from PPO networks to
benefits, such a co-pays, deductibles and
coinsurance.)
The difference is that with the partially self
funded plan the employer holds the cash needed
to fund benefits (claims from providers), and
instead of sending the fully conventional
premium to the insurance company (such as
By JONATHAN EDELHEIT
BCBS or Aetna), only a small fraction of the
conventional premium is sent in to the
reinsurance carrier and a small amount to the
TPA. The employer purchases reinsurance for
protection, holds the remainder of the
conventional funds (claim funds), invests them,
segregates them if desired, or utilizes them for
general business purposes until they are needed
for the funding of medical claims. The employer
retains and keeps the funds when claims do not
materialize, hence realizing further profit. So,
if an employer was paying BCBS or Aetna
$5,000,000 a year in premiums, and the
employer’s employee claims were only around
$2.5 million, then it is possible for the fully
insured carrier to walk away with close to $2.5
million in profits. If the employer self funds,
the employer is the one who walks away with
the $2.5 million dollars in savings at the end of
the year.
Example A: (Fully Insured Example)
Acme Company is fully insured with a Fully
Insured Carrier and pays a premium of
$1,500,000.00 annually for their health
insurance plan. Claims experience shows that
Acme Company only had $1,000,000 in claims
and administration expenses. The fully Insured
Carrier keeps the $500,000 in profits.
The advantages of self-funding are many.
There is tremendous flexibility in the benefit
plan design. You can decide what you want to
cover and what you don’t, whether it’s certain
vaccinations, chiropractors, injectibles, obesity,
or infertility. Another major advantage, is
portability from one carrier to another. There’s
no disruption in plan when you shift between
reinsurance carriers. You don’t have to start all
over again with new I.D. cards, booklets and