Winning in business is all about reacting to change. But the most successful business owners set their sight on their greatest assets i.e. their people or the workforce. We have witnessed considerable changes since the introduction of the Affordable Care Act, and now is the time to consider self-funding for your company health care plan.
But what is Self-Funding?
Under an insured health benefit plan, an insurance company anticipates the financial and legal risk of loss in exchange for a fixed premium paid to the carrier by the employer. Employers with solutions for self-funded plans cling to the risk of paying for their employee’s healthcare themselves, either from a trust or directly from corporate funds.
The risk in either situation is the chance that employees will become ill and would require costly treatment. When employees of a company have less claims and less expensive illnesses, the self-funded employer realizes an instant positive impact on the overall healthcare costs. Contrarily, if the employee group has unfavorable claims experience, a self-funded employer would incur an instant expense beyond the expectations.
Now, let us consider the things before you switch to Self-Funding:
Know the Difference between Fully-Insured and Self-Insured
The primary differences comprise of new administrative processes, involvement of multiple parties, segregation of costs and most significantly- the risk uncertainty.
What it takes to administer the plan
Apart from the administrative expenses paid to outside entities, the internal staff administrative time and additional expertise will be required.
Consider the irregularity of monthly costs
In a fully-insured plan, an employer usually pays its premium in 12 monthly installments. But under a self-funded plan, the employer might be paying the cost incurred in the member’s claims as they occur through the course of year. Hence, it can lead to uneven cash flow and makes it difficult to plan.
Consider your risks
While examining the organization’s risk profile, it is significant to superintend the catastrophic occurrences among the covered employees and to determine whether they are expected to continue. If so, then it might not be the right time to make a move.
The rising costs of healthcare have compelled employers to look for effective ways in order to manage the cost of benefit plans for their employees. With self-funded health plan, employers assume the control associated with healthcare costs in exchange for many significant financial advantages and giving more alternatives in what their health plan actually offers. The most advantageous assets offered by self-funding are the complete freedom to structure benefits as per the needs of your organization. Employers can choose different types of advantages they wish to offer while choosing to insure individual benefits through traditional means or refrain them offering them altogether. Moreover, employers are also free to administer themselves if they have enough resources or to retain a third-party administrator at minimal cost of a traditional benefits provider.