The Advantage of Self-Funded Plans
In today’s super competitive hiring landscape, employers are turning to their employee benefits to act as a key differentiator while still controlling costs. Traditional insurance carriers typically offer two tools for cost containment. One is higher overall monthly premiums which can be absorbed either by the employer or the employee. The other is lower premiums with higher co-pays and deductibles for visits, treatments, and prescriptions, the cost of which can be borne by the employee.
Self-funded insurance approaches things differently. When compared to traditional insurance, these plans, also sometimes referred to as ERISA plans, provide groups with greater flexibility in plan design. As a result, employers also have more control over the costs for ERISA plans. When appropriate, eligible plans can also have an HRA or HSA associated with them just like eligible traditional plans can.
Now, for the Risk… (Spoiler alert – it’s handled!)
The big question that is usually asked is what is the risk of self-insurance? For groups under 200 employees, the risk is negated by specific stop-loss insurance. This provides protection for the plan sponsor (the employer) against any large individual health care claims. It limits the amount the employer would ever pay for each enrolled participants claims in a given plan year. The cost for stop-loss insurance is built right into the monthly premiums a group pays so businesses budget for these costs very easily.
And Then the Reward…
In addition to the flexible plan designs and cost savings, another advantage of self-insurance is the potential REFUND. And no, that’s not a typo! Groups whose overall claims run below what the insurer expected can receive a refund of unused claim dollars when the plan year concludes. These refunds can be full, partial or rolled over for use in the next plan year – depending on the specific plan arrangement. This is all spelled out in the plans contract ahead of time so the group knows what to expect. When available, this surplus of funds can be used to offset costs for the next plan year or to fund a whole new company initiative, the choice is up to the employer.
So self-insurance sounds great for the employer, but how do employees feel about self-funding insurance plans? Moving from a traditional insurance plan to a self-funded plan is usually completely seamless for employees. Most have no idea that their new plan is considered self-funded since the plans are administered the same way as a traditional plan. Claims are submitted, processed and paid just like the traditional plans that employees are used to. Additionally, any contributions made by employees are still handled through pre-tax payroll deductions.
Let benefEx Help Design a Self-Funded Plan That Is Right for Your Company
At benefEx, we are leaders in the insurance industry with decades of experience. Contact us now about how to self-fund your employees’ healthcare benefits and improve your benefits offering and your bottom line at the same time.