AOL, Self-Funded Health Plans, & You
Because of these costs and other costs which he associated with the ACA, AOL (temporarily) threatened to cease making contributions to employee 401(k) accounts.
Among other things, the story raised the question: “How does AOL know about the medical expenses incurred for these two babies?”
The answer is, probably because AOL operates a self-funded group health insurance plan.
What is a self-funded health insurance?
A self-funded (or self-insured) plan is one where the company basically owns the group health insurance plan to which employees belong, and pays the covered portion of all policy members’ medical bills.
The employer may hire a health insurance company to administer the group plan on its behalf, but the company is the payer rather than the insurance company.
Contrast this with standard group health insurance plans which are both “owned” and administered by the insurance company and the insurance company is the payer for all covered medical bills.
Are self-funded group health insurance plans common?
Many larger companies (especially those with 1,000 or more workers) are self-insured, but it’s rare to find self-insured plans among mid-sized or smaller companies.
Self-funded plans currently cover 60 percent of private-sector workers who have health insurance—an estimated
100 million Americans.
What does it mean for me if my employer self-insures?
It’s not necessarily a bad deal for workers when employers self-insure their group health plans. For example, if the company saves money on health insurance, it can be reinvested and may result in lower insurance premiums or better benefits for employees.
There are sometimes more tangible benefits, too. For example, with self-funded plans the company rather than the insurance company is sometimes the authority of last resort when there’s a question about whether something should be covered.
I used to work for a health insurance company that administered a self-funded group health plan for a major Fortune 100 company. I saw that in certain cases where an expensive form of treatment shouldn’t have been covered according to the rules of the plan, the self-funding company would occasionally step in and pay for it anyway.
But there are some potential negatives in self-funded plans too. Perhaps we’re seeing one of those negatives in the AOL story.
Because, while patient privacy and non-discrimination laws still apply to self-insured plans, it is certainly easier for self-insured employers to potentially gain insight into the medical issues faced by individual workers.
After all, they’re the ones paying the bills.