Many businesses choose a traditional fixed-cost health plan for their employees. Still, self-insured options are becoming increasingly popular as more and more companies understand how beneficial this approach can be. According to a 2020 study by Deloitte, 60% of covered workers at businesses with three or more employees participated in either partly or fully self-funded plans.
Instead of paying a fixed premium to an insurance company, employers pay the healthcare claims filed by their employees directly. This entails creating an account for health expenses used to cover them as incurred.
These businesses typically purchase stop-loss insurance to minimize the impact of high-cost claims. This policy will refund an employer for any claims exceeding a specified amount.
Self-insured employee benefits are a good option for many small and midsized companies, enabling them to offer high-quality benefits that can enhance employee recruitment and retention efforts while saving money in the face of rising healthcare costs.
Better Financial Control
One of the most significant benefits of a self-insured model is the savings it can offer. While employers must pay a set premium to their carrier for yearly claims expenses with traditional health insurance, employers pay claims as they occur with self-funded plans. This means employers have fewer fixed costs and more control over claims expenses.
Because traditional premiums are often based on national statistics, the savings can be particularly high for businesses whose workforce is healthier than the national average.
Lower Administrative Costs
Another important benefit of self-funded models is avoiding the additional costs and fees involved in fully insured plans. With these more traditional plans, as much as 20 percent of the total cost to the employer may go toward administrative costs, margins, and taxes.
Tailored Health Solutions
With a self-insured plan, an employer can develop a health solution tailored to their worker population. This provides an opportunity to minimize their overall claims expenses.
For example, they can decide how to invest funds and implement employee intervention programs. They can also choose the plan options and providers that best suit their workforce. With the right approach, they can put their employees on a path to making wiser choices about their health and well-being.
Technology continues to advance rapidly, and businesses now have access to unprecedented information. In the age of Big Data, it is easier than ever for companies to access and analyze data on their healthcare usage to identify trends and find areas where savings can be made.
Better Control Over Risk
Self-insured employee benefits allow companies to proactively manage their risk instead of transferring it as they would in a fully insured plan. With fully insured groups placing all of the risks on the carrier’s shoulder, they often miss chances to save money. However, with a self-funded approach, the employer can obtain a stop-loss insurance policy that protects against the financial risks of catastrophic claims.
Many companies with traditional plans need to learn how their actual claims compare to their premiums. However, self-funded plans give employers full visibility into every claim filed, allowing them to manage their costs and identify opportunities for further savings.
Every state has mandates and tax rates for fully insured health plans, often between 2 and 3%. However, governmental intervention in self-funded plans only occurs at the federal level; these plans are not taxed at the state level, and companies can enjoy a simpler compliance environment.
No Large Renewal Increases
Renewal time can be stressful with fully insured programs. Employers are often hit with significant increases if they had many claims during the previous year. Insurance carriers always seek to profit and can charge higher premiums not in line with the company’s claim experience as they seek compensation for the higher costs incurred by their risk pool overall.
While a poor claims year will also be costly for businesses with self-insured programs, they can pay a higher premium in the future. If their employees’ health improves the following year, they will likely spend less money.
Discuss the Benefits of Self-Insured Employee Benefits With Business Benefits Group (BBG)
The experienced benefits consultants at Business Benefits Group (BBG) can help your company determine whether a self-funded approach is right for you. We will work with you to assess your business, workforce, and budget, and if self-funding makes sense, we can guide you through the entire process. Contact us today at (844) 201-3609 to schedule an appointment to discuss your business’s objectives or request an online consultation.