If there’s one thing we can predict about the pandemic, it’s that healthcare costs are only going to increase in the long-term. for example, health benefits are priced at over $8000 per employee. This represents a significant cost for most businesses. Considering that most are still reeling from the economic impacts of COVID-19, companies need a more efficient solution for providing their employees with healthcare.
Enter Self-Funded Health Insurance. In this article, we will discuss what this is exactly, how it’s different from traditional insurance, and what benefits it can offer business.
A Basic Description Of Self-Funded Insurance
Self-funded health insurance is an arrangement wherein a business takes charge of paying for its employees’ health benefits. This means that every time an employee makes a claim, the payments are withdrawn from the business’s own funds.
In contrast, fully insured plans are arrangements that are funded by major insurance companies. With this more traditional way of procuring health insurance, a business would purchase policies for each employee. The health policy would indicate a set of coverages for medical treatments, surgery, prescription drugs, and sometimes, dental procedures. Usually, the level and kind of coverages included in the policy is uniform across all enrolled employees.
Furthermore, self-funded health insurance is also subject to federal-level regulations under the Employee Retirement Income Security Act. Meanwhile, state-level laws regulate fully funded insurance plans.
Who Administers The Health Insurance Benefits
Employees whose organizations have a self-funded health plan are typically unaware of the fact. This is because their health cards would most likely carry the name of big insurance providers. What this means is that their organization contracted a third-party insurance company to administer the health benefits.
While the employing organization is still directly responsible for raising funds to pay for the health claims, the processing of these claims is delegated to the third party. In doing so, the organization can ensure that its health plan is executed by a company that has the right infrastructure and human resources to do so effectively.
Advantages Of Self-Funded Insurance
The cost of healthcare is on the rise, continuously driving up insurance premiums. for example, have some of the highest health insurance rates in the US. This is why a lot of businesses nationwide — are switching to self-funded health insurance.
Compared to more traditional fully-funded insurance packages, these health plans can be more cost-effective because of their customizability. Fully funded health plans are often one-size-fits-all for every employee enrolled in the policy. This means that the business pays the same fees for every enrollee, regardless of how much each employee utilizes their plan. In self-funded insurance, the business only pays for the health benefits claimed by each employee.
Furthermore, the customizability of self-funded health plans can also greatly benefit employees. Given that each person has their own individual health care needs, their coverage can be tailored accordingly.
If your business is planning to set up its own self-funded health plan, we have a team full of experts ready to assist you. Contact us today by visiting National Insurance Partners.