New Way for Employers to Take Charge of Their Health Care Costs
Studies Show that Self-Funded Insurance Plans Save Employers 10-30% on their Annual Health Care Premiums.
Years of double digit health insurance price increases have taken their toll on every business owner and if you’re like most business owners, you are feeling the pain and frustration every year your renewal bill arrives.
Cutting benefits to reduce costs can only go so far and asking your employees to dig deeper into their pockets to share these costs with you, only gives you unhappy employees. So, many employers are turning to Self-Funded Insurance Plans and opting out of the traditional fully insured plans to save money.
However, some employers are understandably nervous about taking on the responsibility of Self Insuring their health plan – and there is a lot of mis-information out there about self-insuring, but if you’re frustrated by the high cost of health insurance, you owe it to yourself to find out how these plans really work.
The Pros of Self-Funding Insurance Plans
1. Customized Plans:
Rather than being subjected to a traditional, fully insured health plan where one size fits all, the employer controls what medical benefits will be offered and who will be eligible to participate in the plan. You can also control how much your employees need to contribute to their medical expenses and how much you will reimburse them for. Studies show that employees have fewer trips to the doctor or the emergency room when they are responsible for some of the cost.
Self-funded plans are also exempt from state mandates which means, you decide what medical expenses you want to cover or not cover regardless of state rules.
2. Better Data:
You have more access to your employee health claims data and demographic information. Your exposure is limited to your own employees, not a broader population and risk pool,,as is the case with a traditional, fully insured health plan.
3. More Cash Flow:
You can manage your health care payments more effectively. Coverage is not pre-paid like traditional plans, so you have access to more cash flow and interest income that is not available under a standard insurance policy which you must pre-pay each month.
If claims are lower than expected, you keep the savings, not the insurer. In addition, self-funded companies are not subject to state health insurance premium taxes, which may total two to three percent depending on which state your business resides in.
4. Federal Laws Apply, Not State Laws:
The ERISA (Employee Retirement Income Security Act of 1974) law exempts self-funded plans from state rules including insurance laws, reserve requirements, mandated benefits, premium taxes, and consumer protection regulations. However, you do have to follow the U.S. tax code and federal anti-discrimination laws.
5. Lower Premiums for You and Your Employees:
According to the “Employer Health Benefits 2010 Annual Survey” by the Kaiser Family Foundation, self-funded plans have lower single and family premiums than traditional fully insured plans thereby saving you and your employees more money each month.
Studies also show that employers who have implemented self-funded insurance plans save an average of 10% -30% annually on their health care premiums and enjoy lower medical care costs.
The Cons of Self-Funding
1. Financial Risk
With fewer employees (than a big company) to spread over the likelihood of accident or illness, you have a higher risk of costly claims. Smart self-insured employers also purchase stop-loss insurance also known as catastrophic insurance so they can get reimbursed for major claims that were abnormal and not foreseen. This insurance is easily available from major carriers such as Zurich, Arch Insurance and Gerber Life
2. Administrative Costs:
You can either administer the self-insured claims in-house, or hire a third party administrator (TPA). TPA’s can also help employers set up their self-insured group health plans and coordinate stop-loss insurance coverage, provider network contracts and utilization review services. TPA’s are an added cost but are well worth it since they bear the brunt of all payment and claims administration.
3. Federal Compliance:
You the employer are legally responsible for operating the plan. You also have to follow strict Federal rules regarding private claims information since you will now have access to information not previously available. This information must be kept secure and private.
If you would like more information or would like to speak with one of our Self-Funding Insurance Specialists, just call: 914-633-1717