Self-Funding under a Health Insurer: Who Benefits?
On the surface, using a health insurance company to administer a self-funded health plan looks simple and easy. But employers should know they are leaving significant dollars on the table. Called Administrative Services Only (ASO), this arrangement keeps financial control of the health plan with the health insurance company. The employer takes on the plan’s financial risk (pays claims), but the health insurance company remains in the driver’s seat with the employer’s money. For instance, the health insurance company holds and controls the contract with the Prescription Benefit Manager (PBM) under ASO. In this bundled arrangement the employer does not have a choice of PBM, nor does the employer have control of contract terms. Financial Advantage: health insurance company. Why? Because PBM contract terms dictate the price of drugs paid by the plan and the amount of rebate money the PBM will share with the contract holder. Self-funded employers who contract directly with a PBM of their choice can negotiate drug pricing and become the recipient of significant rebate dollars.