ALLOCATED BALANCE MODEL
The Jefferson Health Plan utilizes the expertise gathered over 35 years of program design and underwriting to offer industry leading health care financing options for its member organizations.
Self-funding, paying only for what you use, is the most efficient healthcare purchasing method. Self-funding is used by most large corporations and organizations. But self-funding may present challenges such as unexpected large claims and fluctuations in utilization. These swings make it difficult to budget, and sometimes to fund, the claims liability for small to medium sized employers.
The Jefferson Health Plan (JHP) created a health plan financing method that mitigates the inherent risks of self-funding called the Allocated Balance Model (ABM).
Here’s how the ABM it works. JHP uses the member organization’s chosen plan design, network, past claims experience, and choice of network/third-party administrator to create uniform, monthly funding factors. The member organizations fund these cost factors in monthly installments. The funding factors are used to pay fix costs, to pay claims expense, and to accrue reserves.
When funding exceeds fixed costs, claims expense, and reserving targets, it is allocated back to an interest earning account at U.S. Bank. The member organization retains ownership of its reserves. To avoid overfunding, the member organization may access excess allocated reserves through premium moratoria, or holidays.
If the member organization’s factors are insufficient for claims expense or reserving targets, JHP supports the member organization by providing the necessary funding. There is no interest charged to the member organization for this help.
Member organizations are given multiple years to make up any shortfalls.
The funding factors are re-calculated each year. The member group’s experience is blended with the overall Jefferson Health Plan’s experience for the base renewal. Supplemental factors may be necessary in the event of any deficits.
By utilizing the ABM, member organizations will know exactly what the monthly funding expense will be in its self-funded plan.
The ABM underwriting blend with the 25,000 overall employee group experience will eliminate many of the experience spikes that complicate the budgeting process.
The ABM allows a public entity to enjoy a safer, more predictable self-funded savings.