We are often asked what the difference is between self-insured and fully funded health insurance and why the distinction is important for people seeking insurance approval for bariatric surgery.
Most bariatric surgery patients (like most people in the U.S.) get their health insurance coverage as part of the benefits offered to them by their employer. Generally speaking, health insurance plans are categorized as either “self-insured” or “fully insured” based on how the benefits are funded (i.e., what/who is the source of the money used for paying claims for covered treatment).
Fully Insured Plan
A fully insured insurance plan works like automobile or homeowners insurance. The insured pays a premium, and if a claim is submitted, the payment is funded by the insurance company (e.g., State Farm, Allstate, Geico, etc.). Apart from uncovered items and deductibles, the premium is the only financial obligation the insured has. Similarly, in fully insured health insurance, the employer pays a premium to an insurance carrier (e.g., Aetna, CIGNA, Blue Cross Blue Shield, UHC, etc.) and that company assumes all the risk associated with paying covered health insurance claims for the employee group.
Self-Insured / Self-Funded Plan
With self-insured (a.k.a. self-funded) insurance plans, the employer assumes some or all of the risk associated with their employees’ claims against the plan rather than simply “shifting” that risk to an insurance company in exchange for paying a premium. In 2020, 67% of all employees covered by health insurance were in a self-funded health plan. Self-funding is common among larger firms because they can spread the risk of costly claims over a large number of employees and dependents.
Why Does This Matter for Bariatric Patients?
It matters for several reasons. First, you’re not always dealing directly with the plan even though the ultimate decision about whether or not a surgery is covered may ultimately rest with the plan administrator (usually the employer). Because an employer with a self-funded plan usually doesn’t have any experience processing health insurance claims, the plan will delegate that claims administration function to a third-party administrator (TPA).
Many times, TPAs are management companies like Zenith Administrators or CoreSource, which specialize in performing those functions for self-insured plans. Other times, the claims administrator may be an insurance company acting as an administrator rather than a payer. So two people may have insurance plan documents that say “Aetna,” but if one is actually insured through Aetna and the other is covered by a self-funded employer plan that is merely administered by Aetna, the two people will have completely different coverage.
Self-insured plans also have the ability to set up their own criteria for when bariatric surgery is (or is not) a covered benefit. Often, that criteria is very different from what their claims administrator customarily uses when it is the insurer.
Appeals can be won because a claims administrator is wrongly using its own medical criteria instead of criteria called for by the plan. Appeals can be won, even in the face of exclusions, when the plan administrator determines it is in the best interests of the plan as a whole to cover surgery for a particular patient.
There are times when the plan language excludes treatment and the employer doesn’t even know it. We’ve had several instances where our appeals have been presented to benefits committees for self-insured plans and when they learn about the benefits of bariatric surgery for their employees, they have revised the plan in order to cover everyone, not just the patient we helped!
One memorable example of what can be achieved when you get the opportunity to educate an employer with a self-insured plan took place when we represented an employee of a Fortune 100 company in her appeal. Although the claims administrator repeatedly denied coverage for the surgery because there was an exclusion for bariatric surgery in the plan language, we presented the appeal to a committee and were successful in getting her approved. What we didn’t know until later was that as a direct result of her appeal, the entire benefit structure for this company was changed to include bariatric surgery. We found this out when our client wrote us an email telling us a story I won’t soon forget:
“I went to the company holiday party this year and was standing in line minding my own business, when a woman I have never seen before ran up to me and started hugging me. I had no idea who she was. Turns out she was the wife of another employee. When she was done hugging me she took my hand, her voice cracked, her eyes welled up and she said: ‘Thank you for fighting so hard for your surgery, because if you hadn’t fought that yearlong battle, I wouldn’t have been able to have my gastric bypass, and I would most likely be dead right now.’ “She kissed my cheek and walked away.”
Now THAT is a victory!