Abstract
The cost of health insurance is on the rise because of the respective rise in the cost of treatments, doctor visits, and medications. Most business, like credit unions, choose to offer health insurance to their employees. As a result of the cost of health insurance rising, it costs the business more money to offer it to their employees. Since credit unions are not-for-profit, this deeper cut into their bottom-line effects them more heavily than it does other business who are for-profit. To avoid these wounds on credit unions’ bottom-line, credit unions should either switch to self-funding health coverage or invest in data analysis services. The idea of a business funding the health coverage it offers its’ employees may not be appealing if one thinks too deeply about, but one would not understand how it would work for them if they do not try it out themselves.
Increase In Healthcare Plans Insured By Credit Unions
A major deal breaker in choosing a place of business to work in are the benefits that company offers. Benefits such as pension, paid sick days, paid time off and the one taken into most consideration, health insurance. Businesses do not necessarily have to offer health insurance. They have the choice to. According to the Affordable Care Act, they can either offer qualified and affordable health insurance to their employees or pay a tax penalty. Credit unions choose to offer health insurance to attract and retain good employees, as do other businesses. At the rate this economy is moving, price hikes associated with offering health insurance will continue affecting those employees who pay for them. The annual rate of insurance premiums is expected to double in the near future. That event is inevitable, but it does not necessarily have to have an affect credit unions. To avoid the backlash of that event, credit unions should either invest in Credit Union Service Organizations (CUSOs) that provide insurance services, such as collaborative benefits, or invest in invest in data analysis services.
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Definition of health insurance
Health insurance is a type of insurance coverage that covers the cost of medical and surgical expenses. Health insurance is usually difficult to keep up with. One can choose their preferred dentist, but that dentist may or may not be a part of the network their insurance plan allows them to receive care from. If one insists on seeing a dentist that is not covered by their insurance, out-of-network, then they must pay a higher fraction of the cost of receiving service from that dentist rather than the insurance company paying it. In some cases, the insurance company will not accept payment of that higher fraction simply because of the choice that was made to receive services outside of their network. Denial of service coverage by insurance companies is also possible if one does not obtain proper authorization before such service is given. In addition to the previously mentioned complications, insurers have the authority to refuse payment for an expensive name brand medication if a cheaper generic version is available at a lower cost.
History of health insurance
Health insurance came about in the time of the Great Depression in the 1930s. Payment for services provided by hospitals and physicians needed to be guaranteed hence the creation of health insurance. Employer sponsored coverage began as a result of World War II and the growth of the labor movement. In 1965, Medicare was introduced to provide coverage to older citizens. The dramatic growth in self-insured employer plans resulted from federal preemption of state insurance laws. In the 2000s, healthcare costs rose rapidly. At that time efforts were under way to encourage employees to pay higher out-of-pocket premiums to accommodate for the rising healthcare cost. In 2010, the Patient Protection and Affordable Care Act (ACA) was enacted, which promises to substantially change the U.S. health insurance markets.
The first health insurance plan was devised out of the Great Depression times. Local hospitals, like other major firms, were affected by the Depression. Ronald Numbers reported that between 1929 and 1930 Baylor University Hospital, then in Dallas, Texas, saw its receipts drop from $236 to $59 per patient. Occupancy rates dropped from 71.3 to 64.1 percent, and contributions were down by two-thirds. Charity care, in contrast, was up 400 percent. Justin Kimble, the administrator of Baylor University Hospital, devised a means for people to pay for hospital care, in today’s terms, healthcare. He enrolled 1,250 Dallas public school teachers into the Baylor Plan. For 50 cents a month, he promised to provide 21 days of care in his hospital. Plans like the Baylor Plan were made across the U.S. In 1933, those plans were to be viewed as insurance per the New York state insurance commissioner. That is how insurance came to about. Today, according to the National Association of Insurance Commissioners, there were 858 health insurance companies in the U.S. that altogether offer more than 1,000 health insurance plans.
Further research
The rise in prices for treatments, doctor visits, and prescription drugs are the cause of the respective rise in health insurance today. As of 2016, the cost of health insurance has increased 140% over the past ten years. The increase in the cost of health insurance paid by businesses, like credit unions, causes those businesses to augment the amount of insurance premiums employees pay to account for the increase in insurance costs. The upsurge in insurance premiums is what causing credit unions to not offer the generous employee benefits they would like to.
Credit unions are not-for-profit financial cooperatives. They are not in the business of making money off people but are in business to provide services for the people. In them being not-for-profit, they do not take to heart the value of their assets. Of course, money is important to them, but they are not, in a sense, greedy for it. With that being said, credit unions may be considered “poor” or “rich” at times. Credit unions, again, choose to offer employee benefits, such as health insurance, to attract and attain good employees. Offering health insurance, more often than not, cost credit unions money they, at times, do not have. This is where the problem exists. To manage the increase in the cost of health insurance, credit unions are forced to reduce benefits and increase premiums for their employees, sometimes driving them away or having potential employees steer clear of them.
Types of insurance plans
Businesses have the task of choosing how to best fund the health insurance plans they offer. Businesses can either be fully funded, self-funded, or partially funded.
Fully funded coverage is offered by an insurance carrier. Insurance carriers such as Aetna, Humana, Cigna, etc. This is what most people mean by “insurance”. A fully funded plan removes most risk from the employer and employees and places it on the insurance carrier. The guaranteed cost of the insurance plan is higher.
Self-funded coverage is opposite of fully funded coverage. Self-funded coverage is where the employer assumes the risks and pays claims. Businesses pay for the health insurance of their employees directly from their own funds rather than by purchasing health insurance from carriers. In a self-funded insurance plan, a business provides all the funds to pay for expected claims. In other words, the employer has formed an “insurance pool” with the employees.
Partially funded coverage is where both the employer and insurance carrier assume some risks and share claims. It combines both fully funded and self-funded coverage. It gives employers control and flexibility that a fully insured plan cannot.
Collaborative benefits
Human Resource (HR) professionals have always desired more flexible funding arrangements and a more responsive plan design when it comes to choosing the type of health insurance to offer employees. Because of this, many credit unions are considering a transition to self-insured coverage. HR professionals can offer a wider selection of plan choices and negotiate better rates on healthcare coverage for employees with collaborative self-insured coverage. Through this collaboration, credit unions pool resources through a service network and in them doing so, they create better benefit packages and lower healthcare premiums for their employees. Both employees and credit unions benefit in this situation. Credits union are waking up to the idea of collaborative benefits solutions. Over the last two years, several have been making the switch. As more credit unions collaborate and pool resources through self-funding, more opportunities to create better benefit packages at lower costs become available. They, as a result, do not have to be affected by the spiking insurance rates.
Data analysis
Offering generous employee benefit plans has been a hallmark of the credit union industry, but “continuous price hikes, along with the insurance industry’s practice of announcing new pricing late in the year, keeps making the healthcare benefit/cost balancing act more and more difficult,” said InterLutions President Jesse Kohl. “Oftentimes, renewal terms are not known until shortly before open enrollment begins. As credit unions wait for the new terms, they run out of time to make strategic and impactful changes. Falling into this trap makes it a challenge to stay ahead of the game, but it is possible.” Data analysis makes it possible.
With the advancement of technology in today’s day and age, credit unions can accurately and efficiently track costs that identify as a credit union’s top three–five cost drivers. With analyses that can pinpoint the part of the health plan budget that costs the most, credit unions can create targeted approaches to control benefit plans, thus controlling the effect the rise in insurance has on them. Data analysis allow credit union HR managers to reduce the influence of high-cost factors on majority of plans.
Conclusion
One of the many factors that are taken in consideration when choosing a business to work in is the type of health insurance coverage offered to employees. How much will I pay for coverage? Are routine exams covered? Will I be able to keep my current doctors? Those are some questions employees should ask when choosing a health insurance plan that best fits them and their needs. Credit unions should either switch to self-funded health insurance coverage or invest in data analysis services so that employees will have positive, well-deserved answers to those questions. Credit unions will be able to create better benefit packages and lower healthcare premiums for their employees if their health insurance is self-funded. When investing in data analysis services, credit unions can pinpoint the part of the health plan budget that costs the most, thus creating targeted approaches to control benefit plans. Conforming to either of these practices will allow credit unions to remain unaffected or remain the least affected by the rise in health insurance. Health insurance is expected to double in the near future. There are many credit unions across the United States that are adopting these two solutions to avoid this rise in health insurance becoming a problem to them.
Rebuttal
Switching to self-funded coverage is not too good to be true. It is true, but it is not all good. When a business is self-funded, there is no insurance carrier. The insurance carrier has no jurisdiction to make decisions on whether a certain doctor’s visit is covered. Employers, however, does. They is the decision-maker in this situation. One way one can think about in a negative light, but it does not necessarily have to be a bad situation. One really can not decide if self-funded health insurance coverage will work for them if one does not try it out. Do not dismiss the idea of a credit union being self-funded. Remember, credit unions are in the business of serving the community. Their employees are a part of that community and they will not make any effort to pull a fast one over them. They are in good hands in a credit union.
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