Employers are turning to self-funded plans as a way to regain control over their benefit programs. They offer many benefits over traditional fully insured plans, including lower administration costs, greater flexibility and financial accountability.
What Is A Self Insured Medical Plan?
A self-funded healthcare plan is a system in which the employer pays health care claims using its own money and that of the employees. The funds are then deposited in an account that will pay claims. To manage the process, the employer usually works with an experienced broker or third party administrator (TPA). This person will help to ensure that the plan's design is appropriate for the employees of the company and their budget.
What is a Self-Funded Insurance Plan (SFIP)?
Self-funded insurance plans are medical, dental, and vision benefits that use the employer's money to pay for services. This is a great option for smaller businesses, as it allows them to control their costs. It can also be used by employees to cover their dependents, who do not qualify for other types of insurance such as Medicare.
What Is A Self-Funded Plan of Medical Care?
A health insurance plan which combines the employee-sponsored component of self-insurance with a contract for group coverage with an external carrier. Often the employer contracts with an outside TPA to handle the administration of the self-insured components, such as enrollment, claims processing and network drafting.
Administrative costs for employers are comparable with those of a fully insure plan. The only difference is that self-funded claims are billed month-to-month and not annually like fully insured claims. These monthly expenses include administrative costs, stop-loss coverage and the variable cost associated with healthcare.
Shock claims are a real risk in self-funding
As the name implies, shock claims are catastrophic and large claims that can cause a plan to fail. These large claims can easily exceed half a million dollars for a single individual's healthcare treatment over the course of several years. Shock claims can also have a major impact on the employer's financial outlook, as they can drain the company's reserves and cause it to experience negative cash flow.
Understanding Self Funded Health Insurance
Self-funded medical plans may offer many benefits but they aren't for everyone. Employers worry about high-cost claims, so it is crucial to weigh the pros and con before choosing a plan.
With a self-funded plan, the employer can choose the best benefits package for the workforce. This reduces costs and improves employee wellbeing. Also, it allows employers to take a more active role in population management initiatives such as programs for weight loss or quitting smoking. It is a great option for small and mid-sized businesses that want to control their employee's health costs while encouraging healthy behaviors and increasing the quality of care for their workers.