Self-funded Health Insurance: A Smart Solution in a Down EconomyEach year employers evaluate healthcare plans and analyze ways to contain healthcare associated costs. As employers, it’s important to stay at the forefront of current insurance trends, keeping in mind the overall health of your employees and the financial wellbeing of your organization as a whole.
One innovative new approach to health coverage is the self-funded benefit plan. Self-funded plans are becoming increasingly popular due to their potential cost savings and flexible plan design.
What is self-funded insurance?
A self-funded plan is one in which an employer retains the responsibility and related financial risk of providing healthcare benefits to its employees. Within a self-funded plan, employers can also purchase stop-loss coverage, which places a ceiling on financial risk, protecting employers from high claims. Employers pay out-of-pocket expenses instead of transferring the risk and paying a fixed premium to an insurance carrier.
One of the biggest drawing points of self-funded plans is that they can be customized by each employer to meet the specific health care needs of its workforce, as opposed to purchasing a fixed plan. Small and mid-sized companies gain the same advantages as their larger counterparts when implementing a self-funded health care plan because it provides them with financial and administrative control, improved cash flow and plan flexibility, while still providing the best access to healthcare benefits for employees.
Under a self-funded plan, companies pay as they go without worrying about paying premiums or pre-funding claims costs. Companies pay claims as they are incurred, allowing them to invest and receive returns on unused funds. Additionally, self-funded health plans are liable for state taxes only on stop-loss premiums while fully insured plans are liable for state premium taxes on total plan cost. According to industry experts, this disparity results in direct, automatic savings to a company that self-insures. These savings are estimated to be two to three percent of the premiums’ dollar value.
The flexibility of self-funding allows a company to custom design a cost-effective health plan tailored to its employee base. With the help of experienced plan design specialists, a company can identify additional cost-savings opportunities while custom building a plan that supports corporate objectives and offers a range of options to match the needs of a diverse workforce.
To develop a more cost-effective plan, companies can exclude or limit benefits, while still meting employees’ needs, offer alternative health plan options, coverage for alternative treatment procedures, and design prescription drug plans that provide cost savings opportunities. This helps to drastically reduce risk, while still providing employees with quality healthcare benefits.
Administering a health plan helps companies operate efficiently and effectively. Having administrative control allows employers to make continual improvements and detect areas where modifications of systems and processes can be made, with the goal of optimizing plan performance, improving employee satisfaction and, ultimately, saving money.
| ||David C. Parker |
David C. Parker is the senior vice president of sales for Meritain Health (www.meritain.com), the country’s largest independent provider of services for self-funded health plans. For more information, call 1-800-242-6226 or email firstname.lastname@example.org.