Employers who want to take back control of their benefit program are increasingly choosing self-funded insurance plans. These plans offer a good alternative to traditional health plans that are fully insured. They also have many advantages including lower administrative expenses, greater flexibility when designing the plan and more financial accountability.
What Is A Self Insured Medical Plan?
An employer-sponsored self-funded health plan allows the employer to pay for healthcare services by combining its own funds with those of the enrollees. These funds are deposited into an escrow account for the payment of claims. An employer will typically use a broker or TPA to oversee the process and make sure the plan is right for employees and business budget.
What Is A Self Funded Insurance Plan?
A self-funded insurance plan is a medical, dental and vision benefit program that uses an employer's own money to pay for health care services. It is an excellent option for small businesses as it allows them control their costs. The plan can also cover the dependents of an employee who don't have access to other insurance options such as Medicare and Medicaid.
What Is A Self-Funded Plan of Medical Care?
A health plan that includes a self insured component sponsored by the employees and a contract for group health coverage with an outside 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. Self-funded claims will be billed on a monthly basis, not annually as with fully insured claims. These monthly costs are the administrative fees as well the stop-loss and variable cost of health care.
Shock Claim Risks are Real in Self-Funding
As the name suggests, shock claims are catastrophic claims that are large enough to derail a self-funded plan. The cost of a single person's medical treatment can easily reach half a mil for several years. These claims can have a significant impact on the financial health of the company, as well. They can drain its reserves and lead to negative cash flows.
Understanding Self-Funded Health Insurance
Self-funded health plans are not suitable for everyone. Employers are worried about the high cost of claims. They should weigh pros and contras before selecting a policy.
With a self funded health plan, employers can select the most cost-effective benefit package to offer their workforce. They also have the ability to improve employee wellness and reduce costs. This allows employers to become more involved in population management programs, like weight loss and smoking cessation. It's a great choice for small and medium businesses who want to control employee health costs and encourage healthy behaviors while increasing the quality and care of their workers.