For some businesses, a traditional fully insured health plan may no longer fit as healthcare costs change. A self-funded health plan is another way to pay for employee healthcare, but it also means the employer takes more responsibility for claims.
Before making a change, businesses should review their current plan, claims history, financial position, and ability to manage additional risk.
Understand How Self-Funding Works
With a fully insured plan, the employer pays a premium to an insurance company, which covers eligible claims. With a self-funded plan, the employer pays covered claims directly and works with other providers to manage the plan.
Businesses considering self-funded health insurance should understand that this approach can provide more visibility into healthcare spending and more flexibility in plan design. However, it also requires careful planning and an understanding of possible claims costs.
Review Your Claims History
Claims history is an important factor when considering self-funding. Employers can review past healthcare spending, claims patterns, and workforce size before deciding.
Looking at actual data can help businesses understand how their healthcare plan is used, rather than relying only on the annual renewal rate.
An employee benefits benchmark calculator can also provide a useful reference when reviewing current benefits costs.
Consider Your Financial Position
Self-funding means an employer takes more responsibility for healthcare claims. Because of this, businesses should consider whether their cash flow and financial resources can support this type of arrangement.
Risk is also an important consideration. Employers should understand how stop-loss protection works and what financial responsibility may remain under their plan.
Explore Level-Funded Options
Businesses looking for an alternative to fully insured coverage can also consider level-funded health plans.
A level-funded plan generally combines expected claims funding, administrative costs, and stop-loss protection into a regular monthly payment. It can offer some features of self-funding while providing a different way to manage monthly costs.
Consider Your Employee Benefits Strategy
Changing how healthcare is funded should also fit into the company’s overall employee benefits strategy. Employers should consider coverage, employee contributions, provider networks, plan design, and how any changes may affect employees.
Businesses can explore employee benefits solutions to review different approaches and find options that may fit their organization.
Get a Professional Review
No single funding structure works for every business. Employers should compare their current plan with other options based on their workforce, claims history, financial goals, and risk tolerance.
A free employee benefits analysis can help businesses review their current plan before considering a change in how they fund healthcare.
Final Thoughts
A self-funded health plan can give some employers more visibility and flexibility, but it also means taking more responsibility for healthcare claims. Reviewing claims history, financial resources, risk, and available options can help businesses decide whether self-funding is worth exploring.
JS Benefits Group helps businesses review their benefits strategies and compare different funding approaches. Contact JS Benefits Group to discuss your current plan and available options.
