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?
The self funded insurance model should be thought of as a long-term strategy that can be used by employers who want to keep their costs low, and 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 it is important for those choosing a self-funded insurance model to provide the funding up front.
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.
Flexibility
With a self-funded plan, employers can customize their plans to fit their employee’s needs. By breaking apart the traditional health insurance models, you are able to choose from different vendors to find the best fit for your company. 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.
Prescription Customization
With a self funded insurance model, pharmacy benefit managers can help your company to find areas where costs can be contained in terms of prescription usage.
By working with an experienced employee benefits consultant at New City Insurance, your company administrators can help your business choose a customized plan 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.
Price Transparency
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, your business will have complete transparency into each claim that is filed so the costs can be actively managed to find greater savings. In addition, self-funding provides full transparency of monthly spending by allowing businesses the ability to set specific premiums for each employee every month. Self funded plans allow business owners the flexibility to plan costs based on their amount of employees, resulting in a more accurate budget projection.
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.
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.