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The growth of self-funded health plans gives employers and payers a new way of working together which can benefit both stakeholders. However, there have been significant growing pains with self-funded health plans caused by a lack of funding visibility, inefficient, slow processes and the need to collect in arrears for payers. Recent trends in healthcare payments show that change with self-funded plans is very much needed for payers. Only with payment innovation can employers and payers take advantage of the potential and flexibility of self-funded health plans.

In recent years, self-funded health plans have gained popularity among employers and payers alike. These plans offer flexibility and cost-control benefits that traditional fully-funded plans cannot offer. According to Kaiser Family Foundation, 65% of covered workers were in a self-funded plan in 2022, with 82% of covered workers in large firms enrolled in self-funded plans.

However, self-funded plans also present unique challenges to payers and employers, which require innovative solutions to ensure efficient operations. This blog post explores the challenges faced by payers and employers in managing self-funded health plans and discusses the trends and data that highlight the need for innovation in this space.

Operational Challenges Faced With Self-Funded Plans

While self-funded health plans deliver many benefits to employers, managing the plans effectively can be difficult with current processes. The challenges include funding visibility, slow manual workflows and collecting in arrears.

  1. Lack of Funding Visibility: One of the significant challenges faced is the lack of funding visibility. With self-funded plans, employers bear the financial risk and are responsible for paying claims. However, employers often do not have a way to see their funding and claims data in a timely or efficient manner. This can cause payers to struggle with managing call volume and resources due to the uncertainty around when and how much funding will be available.
  2. Slow and Manual Processes: For both employers and payers, the reliance on slow and manual processes can be a significant burden to managing self-funded health plans. It is not unusual for data to be managed and transferred with spreadsheets, and information to be shared with direct contact. Many payers and employers still primarily rely on paperwork and manual data entry, making managing self-funded plans time-consuming and prone to errors. These outdated processes not only hinder efficiency but also make it difficult to scale the potential of self-funded plans for both payers and employers.
  3. Difficulty in Collecting Funds: Many payers also face difficulties in collecting funds in arrears from employers. This happens when claims are paid to the providers, but the employers have yet to fund the accounts for the claim payments. There may even be millions of dollars in working capital missing for payers due to the issue of collecting in arrears. This also requires additional payer resources to track, manage, and collect the outstanding funds from employers.

Trends on Why Self-Fund Plans Need Payment Innovation

Recent trends in healthcare payments show the need for innovation in self-funded health plans to address the challenges mentioned above. Let’s take a closer look at some of these numbers:

  • 54% of payers want new ways to manage self-funded plans: This data point clearly indicates that payers are seeking innovative solutions to enhance their management of self-funded plans. There is a recognition that the traditional methods may not be sufficient in meeting the evolving needs of these plans.
  • 48% of payers say employer call volume is a top challenge: High call volumes from employers seeking information and clarification create a strain on payer resources. An innovative approach can streamline communication channels, automate notifications, and deliver self-service options to alleviate this challenge.
  • 47% of payers say resources to manage employer communications is a top challenge: Managing employer communications can be resource-intensive and time-consuming. Innovative tools, such as online portals and automated notifications, can help streamline and automate these communications, allowing payers to allocate their resources more efficiently.
  • 43% of payers say resources to manage billing and payment of fees to employers for self-funded plans is a top challenge: Collecting fees from employers for self-funded plans can be a complex and manual process. By leveraging automation and electronic payment methods, payers can streamline the billing and fee collection process, reducing the administrative burden and improving efficiency.
  • 33% of payers say collecting in arrears from employers with self-funded plans is a top challenge: Collecting funds in arrears can create significant challenges for payers. By exploring innovative funding models, payers can minimize the need for collecting funds in arrears, reducing the associated challenges.
  • 38% of payers want to reduce or eliminate the need to collect in arrears from employers: This data point demonstrates a clear desire among payers to find alternative payment methods that eliminate or reduce the need to collect funds in arrears. Innovation in this area can help alleviate financial strain and improve cash flow for both payers and employers.

In conclusion, self-funded health plans offer numerous benefits, but also come with operational challenges that require innovative payment solutions. Payers and employers need to embrace new technologies, streamlined processes, and alternative payment methods to make these plans more efficient. By doing so, they can improve funding visibility, reduce administrative burdens, and enhance the overall management of self-funded health plans.

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