Missing Pieces

Interesting article on self insurance.

Like most Alabama hospitals, Pickens County Medical Center is self-insured. Self-insured means that the employer, not an insurance company, covers the bill for care. So when a patient visits the doctor, he or she pays the co-payment and the employer (in this case, the hospital) pays the remainder.

Technically the plan administrator (TPA) pays the claim using a combination of employer & employee money in a loss fund.

For the most part, the process runs smoothly, McElroy said. It’s the catastrophic illnesses, like cancer, that throw off the system.

Cat claims can be covered by reinsurance. If the claim level the employer wishes to cover is $100,000 then the reinsurance will pick up claims xs of that level, protecting the loss fund against a large claim.

The hospital was still paying the bills from those illnesses during the first quarter of the fiscal year. And another recent catastrophic case has also hit the hospital.

Sounds like the loss fund is underfunded, there is inadequate reinsurance, or both.

Both of these could have been rectified with adequate funding, sufficient reinsurance, or both.

For the first quarter that ended Dec. 31, 2006, the hospital lost $48,800. While revenues were higher than expected for that same period, medical bills were higher than budgeted. If fact, medical expenses came in at $321,000, double what was budgeted for the first quarter.

Budgeted or funded?

Employees have two options when it comes to receiving health benefits from Pickens County Medical Center: an individual plan or a family plan. Most have the family plan, which costs about $140 a month.

$140/month for family coverage is a bargain.

While the catastrophic events can’t be predicted or controlled, McElroy said other uses of health insurance can be controlled. Educating the employees about how to use the benefit in a cost-effective way took center stage.

“I told them only the employees can impact that number. I don’t have much ability to manage that number," he said. “So you tell them things like, don’t bring children to the emergency department just for convenience sake, if you can get to primary care physician that costs less.

Denying claims for non-emergency care in a trauma center goes a long ways towards educating the participants and making your point.

It seems like either the author of this article, or the benefit manager, or both, have missed some important points in self funding. I wonder what the missing pieces will reveal?