As a traditional health insurance alternative, a self-funded health plan allows employers to provide lower-cost health benefits to employees and still maintain compliance with Affordable Care Act (ACA) mandates. But how these plans actually work has remained somewhat of a mystery. Now, a well-publicized lawsuit sheds at least some light on how it all works.
According to multiple news sources, a number of self-funded benefit plan fiduciaries have filed a class-action suit against Anthem Inc., or Elevance Inc., as the company is now known. The lawsuit claims that Anthem violated multiple provisions of the Employment Retirement Income Security Act (ERISA) in providing both services and information to self-funded plans.
More About the ERISA
The ERISA is federal legislation that governs how health plans provide information, control assets, settle grievances, etc. It is a fairly comprehensive piece of legislation with many moving parts. A health plan provider failing to adhere to just one or two provisions can have profound impacts on self-funded plans, employers, and even subscribers.
Plaintiffs in the lawsuit allege just that. They claim that they and many of their counterparts were not provided necessary access to plan data in violation of the ERISA. They further claim that anthem failed to properly administer customer claims and “disposition of plan assets.”
In a nutshell, the plaintiffs allege that Anthem, through multiple subsidiaries including Anthem Blue Cross, failed to give consumers what they were paying for by denying their self-funded plan fiduciaries reimbursement and access to claim data.
How Self-Funded Plans Provide Services
Regardless of how the lawsuit turns out, it being made public has opened the door to understanding just how self-funded plans work. The starting point is understanding what self-funded plans are. For that, we turn to StarMed Benefits (https://starmedbenefits.com/), a Nevada company that acts as a third-party administrator of employer-based, self-funded benefit plans.
For all intents and purposes, StarMed acts as a self-funded plan fiduciary. They manage plans on behalf of their clients. They are neither an insurance company nor a healthcare provider. So how do they provide healthcare services?
Service delivery is actually provided by network participants. Just as with a traditional health insurance plan, this means group practices, individual practice owners, hospitals, etc. Self-funded plan administrators give employers, and employees by extension, access to provider networks through companies like Anthem.
Anthems Network Provides Delivery
Actual delivery of healthcare services is provided by Anthem’s network. Anthem alone is responsible for negotiating rates and payments with network providers. They turn around and charge self-funded plans flat fees for all services provided.
In order for self-funded plan administrators to contain their own costs, they need constant access to plan data. Under federal law, companies like Anthem are required to provide the data without question. They also have a fiduciary responsibility toward those self-funded plans they contract with.
Self-Funded Plans Are Not Insurance
The last thing to understand is that self-funded health plans are not insurance. In an insurance scenario, premiums are paid to health insurance companies who then turn around and pay subscriber medical bills, minus co-pays and deductibles. Insurers maintain liability by spreading out their costs across the entire subscriber base.
In a self-funded scenario, the employer pays a flat fee for access to all network services. An employer may choose to cover the entire cost itself or share the cost with employees. In either case, employer payments are fed through the plan administrator to a company like Anthem, who then turns around and pays network providers. It is a pretty complicated system that is typical of how we do things in the U.S.