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Supplemental Health Insurance Plans (SHIP)
Many small Vermont businesses have realized significant savings in the cost of their group health insurance by selecting a high deductible medical plan, and subsidizing a portion of the out-of-pocket cost incurred by employees (and dependents) that would otherwise be the employee’s responsibility. The Plan Sponsor (employer) has a great deal of discretion in designing the supplementary component of the health plan, although the key to a successful program is to keep the design simple.
By offering a Supplemental Health Plan, Benefit Design and Strategies can help your company save money while maintaining a level of benefits your employees are accustomed to.
Supplemental Health Insurance Plans combine traditional high deductible group insurance with a modest degree of company reimbursement derived from the premium savings of the underlying insurance coverage. The size of the calendar-year deductible is predicated on the size of employer group, projected claims and the owner's risk tolerance. Overall plan savings can be realized because typically a small percentage of the participants incur the greater portion of the aggregate SHIP claims, while a majority of enrollees have relatively little or no utilization.
Here are the steps to a successful transition:
- We discuss the risks and rewards to determine your comfort level with this concept;
- We conduct a feasibility study to ascertain if a SHIP would be cost effective for your company,
- Our proposal includes the cost hiring a third party administrator, but you also have the option to self-administer the supplemental plan resulting in additional savings;
- We work with the benefits manager to create the supplemental benefits plan to replace your current medical coverage;
- We prepare easy-to-follow handouts so that employees understand how the plan works;
- We attend employee meetings to introduce the new plan and stay after each meeting to address employees’ confidential questions;
- We encourage employees to email or call us on our toll-free line with any concerns or claims issues regarding the new health plan.
Having worked with self-funded and SHIP medical plans for many years, Ben Bosher and Benefit Design & Strategies, LLC can objectively assess iwhether such a plan will work for you and lay out the costs and benefits when compared to your current health plan.
The SHIP consists of the following components:
The SHIP consists of the following components:
- A Group Health Insurance Policy: An indemnity, PPO, OAP, HMO, HSA or HRA policy having high deductibles and/or co-insurance levels is purchased by the Employer to create a cap of exposure from expensive, unpredictable claims. Several carriers offer such plans in Vermont.
- Plan Administration: The plan sponsor can choose from two options: Self-administration is particularly attractive for a small company unless confidentiality of personal health information isa concern. Hiring a third party administrator is the other choice. Both options will be thoroughly explained by Benefit Design & Strategies to help you determine the best solution for your staff.
- The Claim Fund: The Employer deposits money into a claim fund to cover the anticipated cost of the supplemental payments under the Plan, including a reasonable cash reserve to cover unexpected spikes in claims. Some companies, however, simply cover the funding amounts to the TPA out of current cash flow.
An indemnity plan has one set of medical benefits regardless of whom a patient may see for medical services, offers no medical network and usually has no office visit co-payments.
PPO refers to Preferred Provider Organization medical plan which has richer benefits when seeing in-network providers and facilities and a less rich set of benefits when utilizing out-of-network services. Network providers and facilities will usually submit their claims directly to the carrier for payment. They also agree to write off charges in excess of the carrier’s Reasonable and Customary Allowance. The plan usually includes modest co-pays when seeing providers for routine office visits and varying co-payments for prescription drugs depending on whether the drug has a generic label or is on the carrier’s list of preferred band-name drugs.
An OAP, meaning Open Access Plan, is very similar to a PPO health plan and is more of a marketing term to differentiate one carrier’s plan from that of another carrier.
HMO stands for Health Maintenance Organization. At the time of enrollment, the employee indicates the Primary Care Physician (PCP) of each family member from among the carrier’s list of network providers. The PCP manages all of the patient's medical care and if the plan requires, makes referrals to specialists. HMO plans used to require that a subscriber obtain a referral from his/her PCP with the exception of emergency room services. More recently, most HMO plans in Vermont have waived the referral system in favor of the patient notifying the carrier of hospital admissions and expensive diagnostic services. An HMO plan includes office visit co-pays and separate hospital copays or calendar year deductibles for in-patient and out-patient services.
HSA, or Health Savings Account, is a qualified high-deductible medical plan with no office visit copays or prescription drug copays with the exception for routine preventive services. The federal government has issued regulations to determine which health plans qualify. Once a subscriber has enrolled in an HSA-qualified plan, he or she is able to open a personal HSA bank account at any approved financial institution. This tax-favored accountcan be used to pay most medically-related expenses, both those covered by the medical plan and many others that are not. Unused funds are carried over to the next year.
Under the Health Reimbursement Arrangement (HRA) medical plan the employer sets up health care accounts for each participating employee (and their dependents) and allocates funds annually for reimbursement of approved medical expenses. Unlike the HSA account, the employer ownsthe money allocated to each employee. The employer also determines the amount of unused funds that may be carried over from one year to the next year, the medical expenses that are eligible for reimbursement and usually hires a third party administrator to administer the plan.