Dive In to Self-Funding With These Best Practices for a Smooth Transition

When your client is fully insured, they’re with a medical carrier who bundles all the medical and pharmacy benefits vendors and services together. When your client makes the leap to become self-insured, your first big question is, do you stay with that medical carrier under an administrative-services only (ASO) arrangement or do you go to a third-party administrator (TPA)?

In a self-funded ASO arrangement, the employer is paying for the claims, and the carrier is processing them but does not charge more for assuming any of the risk. It’s like hitting the easy button because it’s still the same pieces being controlled, but you’ve changed the financial mechanism around how your client pays for those claims. Your client will have direct access and insight to their claims experience, pricing, and utilization data. While it’s an easy switch, you still have not given your client the ability to fully customize their pharmacy benefit plan and choose additional vendors they want to work with to create a tailored benefit experience for their employees.

If your client is ready to dive-in with a TPA, you will have greater ability to select things like the pharmacy benefits partner, pharmacy network, stop-loss carrier, and more – things that will help make the plan tailored for their objectives and member needs. The key to finding success with a self-funded pharmacy benefit arrangement is to find a partner who is clear about what they say and do, aligns their incentives with your client, and really helps your client get a fair deal for their pharmacy benefits.

The key to self-funded pharmacy benefit success is to find a partner who is clear about what they say and do, aligns their incentives with their clients, and really helps them get a fair deal.

Chris Brown, Director, Business Development

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Best Practices for the Transition to Self-Funding

As you embark on the self-funded journey with your clients, there are a few potential hurdles to be aware of, which can be managed easily with appropriate planning and oversight:

1. Implementation Time – It’s important to allow enough time for a good implementation process, with a methodical approach to decision-making and setting up the new pharmacy plan. There are a series of steps involved to get all the pieces in place, and you want to ensure there is enough time to really explore the benefit options and optimize the pharmacy spend before go-live. A good rule of thumb is to make a decision by September 1 for a January 1 start date.
2. Accessing Rx Claims Data – Related to the point above about time, medical carriers have been known to drag their feet in providing newly self-funded employers with their pharmacy claims data file. Build in some time to gather that claims data because it’s important insight to have when making decisions about the new plan design. The claims file will provide information on what medications are being utilized, disease prevalence, and what the known risk areas are for your client. This data is crucial to help you make the best decision for your clients and is particularly useful to determine which clinical programs can be implemented upfront to address those risk areas.
3. Evaluating Contract Offers – Contract reviews are equally as important whether you just want to find out if your client has a good deal in their existing self-funded pharmacy arrangement or if they are making the leap to become self-funded. When reviewing the contract, you want to go as granular as possible because the smallest points in the contract, even if just words, could significantly change the economics. At first glance, it may seem like one offer is best, but you may come to find out the contract language doesn’t support those numbers. This has been a chronic problem for employers for many, many years. It’s best to use a side-by-side analysis methodology that controls for all of the variables of each contract option and to use modeling that shows what your clients could expect to pay.

If you are not sure that your clients are in the best deal for the best all-around pharmacy benefits experience, they probably aren’t – and it’s worth exploring the options.