While there are a wide variety of benefits that employees can offer to their employers, health insurance is at the top of most employees’ lists. Health insurance has become a standard in many industries and to attract top talent is a necessity to provide.
When your business is offering healthcare to your employees, there are a few options beyond the traditional health insurance model that may be worth considering. One alternative arrangement that may be beneficial to your company is a self-funding model.
What Is Self Funding?
With a self-funding insurance model, your business will pay your employees’ claims out of pocket instead of paying a full set premium. Although it may sound risky on the surface, your business will continue to partner with carriers, who will set a maximum limit per employee and pay for additional claims exceeding that amount.
Employers typically create a trust fund that will pay out for the claims. A self-funded employer can choose to administer their claims in house or subcontract the service out to a third-party administrator.
Who Should Consider A Self Funded Insurance Model?
Self-funding has a lot of benefits, but that does not mean it is suited to all businesses. It should be thought of as a long-term strategy that can be used by employers who would like to know where their healthcare dollars are going and who wish to keep the extra funds that are not spent on healthcare claims.
Self-funding insurance models need a consistent cash flow to pay employee claims, so this is not a good choice for employers who lack a steady and predictable amount of financial resources.
Benefits Of Self Funding
There are several important benefits that your company may enjoy with a self-funding model. Here is a look at a few of the key advantages.
With a self-funded plan, employers can customize their plans to fit their employee’s needs. Self-funded plans are also exempt from state insurance laws. These laws typically mandate certain benefits that insured plans need to hold. Without these limitations, the plan can be adaptable to address certain requirements for your employees.
With a self funded insurance model, prescription benefit managers can help your company to find areas where costs can be contained in terms of prescription usage.
The plan’s administrators can help your business to find new opportunities to keep prescription costs under control, even as more specialty drugs enter the market and usage rates rise. This often works out to be cheaper than a one-size-fits-all insurance policy.
Companies that use fully insured arrangements with fixed costs may not end up knowing how their actual claims stack up against the premiums paid. With self-funding models, however, your business will have complete transparency into each claim that is filed so the costs can be actively managed to find greater savings.
Improved Cash Flow
One of the biggest reasons many employers choose a self-funded model is improved cash flow. There is no need to prepay for potential claims via monthly premiums, and it is even possible to end up with extra savings should your employees make relatively few claims throughout the year.
Level funding is a type of partially self-funded plan that combines the cost savings and opportunities for customization of a self-funding plan with the financial safety and greater predictability offered by fully funded plans. The employer will still contract with an insurance company, but the insurer will take on a greater degree of financial risk.
Learn More About Self Funding And Self Funded Insurance
We can help decide if a self-funding plan is a right choice for your company by reviewing your current employee census, premium rate history, and the costs of your current plan. By working with you and evaluating your goals, a New City advisor will be able to get your employees covered with the best insurance option.
To learn more about self funded insurance and find out whether it could be a smart choice for your business, speak to the insurance consultants at New City Insurance. Please give us a call at 888.210.2759 or request a consultation online to learn more.