Self-funded health insurance is fast becoming a popular option among small to medium enterprises and big companies. If managed well, a self-funded health plan can create significant savings for employers on their staff’s medical expenses. This is especially attractive for businesses in states where healthcare costs continue to top the national average.
However, the thought of funding your own company’s health insurance can give you pause for thought. After all, you are taking charge of financing your employees’ health claims. Depending on your staff’s collective healthcare needs, this new responsibility can be quite daunting.
Before making your decision, it’s important to consider the benefits and costs that come with a self-funded health plan. In this article, we’ll take about its pros and cons, and how it differs from the more traditional route of getting fully funded health insurance.
Self-Funded Vs Fully-Funded Health Insurance
With traditional and fully funded health insurance, you subscribe your employees to health insurance policies that are financially backed by an insurance company. You pay a monthly premium rate to keep your employees insured.
Your insurer then invests that money in order to raise the funds they’ll use to pay for any medical expense claims covered by the policy you subscribed your employees to. With a self-funded health plan on the other hand, your company is directly responsible for financing your employees’ medical expenses and health benefits. While it’s no mistake that funding your own health plan is a huge financial responsibility, it also has a few big payoffs.
Advantages Of Funding Your Own Health Plan
First and foremost, funding your company’s health insurance saves you from paying monthly premiums. This is incredibly beneficial for business owners, which has some of the highest insurance premiums in the US. Instead of paying a flat rate for your premiums every month, you only pay for the healthcare services that your employees make use of.
Secondly, funding your own health insurance means that you can offer your employees more flexibility and customizability in their health plan. With more traditional insurance policies, your employees would have the same range and level of health coverage despite their varying healthcare needs. In a self-funded health plan, you can adjust each employee’s coverage plan and limits according to their individual medical requirements.
Managing Your Own Health Plan
As mentioned earlier, self-funded health insurance comes with its own financial risks. This is a particular concern for businesses, where healthcare costs are increasing year on year. To guard against excessive expenses on medical claims, companies can invest in stop loss insurance, and implement wellness programs.
Stop loss insurance helps employers pay for employees’ medical expenses that are beyond the limits of the company’s health plan. This allows businesses to continue funding their own health insurance while protecting themselves from financial exposure due to catastrophic health claims.
Implementing a wellness program is also a good long-term strategy for saving on healthcare costs and promoting employees’ health. A wellness program could include regular general check-ups and health screenings. These help your employees detect and prevent chronic ailments and plan ahead for managing disease risks. Your wellness program can also involve nutrition education and fitness club memberships, encouraging your employees to build healthier lifestyles overall.
If you’re interested self-funded health insurance and would like to learn more, our team at National Insurance Partners Inc., are ready to assist.