Everyone is searching for effective ways to save money on their healthcare costs, especially employers, who are shouldering a major portion of the burden when it comes to insurance premiums. So if you are looking for self-insured health plans, you are certainly not alone. Self0-funding is rising in popularity among businesses of all sizes, including those with as few as 50 employees.
Today employers are attracted to self-funding because it comes with a promise to cut down costs, the advantage it provides to customize plans, and the want to be unburdened by strict regulations. Irrespective of the fact whether or not you choose to move to a self-funded health plans for cost containment, it is worth every penny to look for this funding option so that you make the most informed decision for your business.
What is Self-Funded Insurance?
Self-funded insurance is basically a form of employer sponsored healthcare that does not depends on traditional insurance carriers as a channel for medical care. Instead, premium amount is paid to the employer, which the company uses to pay for medical claims. Initially, self-insured health plans for cost containment has been found in larger organizations, around 1000 employees or more, as they are more likely to have larger reserves and cash flow to absorb a bad claim year as compared to any small business. However, the financial advantage of self-funding is that employers get to keep the premiums which are not spent on the claims. But if we talk about the snag, then you are opening yourself up to greater risk of variation in expenses. You will save money in a low claim year but you will have to be prepared for over expenses in a high claim year.
Is Self-Funding the Perfect Option for your Business?
Evaluating whether self-funded insurance is right for your business concerns the overall health of your business personnel, financial discipline, and the amount of risk you are ready to take on. More the workforce, larger will be your premium pool and this is one of the reasons self-funding is very popular among big organizations.
But if you are a small business with few employees, self—funded insurance can still prove beneficial for you, but you will want to consider stop-loss coverage with thin risk-corridors to ensure that you are not leaving yourself exposed. The base line is that you don’t want to be stretched to an extent that you risk losing your business in a high claim year. So whether or not self-funded insurance is right for your company depends on a number of factors. However, the best thing is to speak to your employee benefits broker before taking any decision because they can help find out various scenarios and undertake risk eliminating strategies to make self-funding a real possibility.