Self-Funded Medical for Businesses
Is Self-Funding Right For Your Company?
The ACA has changed forever both fully insured and, self-funded opportunities across the Nation. The industry has responded well to these pressures with improved employer opportunities for those considering a switch to a self-funded medical plan. Because health insurance costs are a significant expense for most organizations, reducing medical cost and shifting those savings elsewhere can have a dramatic impact.
When using a self-funded plan, employers assume the liability and risk associated with uncertain healthcare costs in exchange for a number of significant financial benefits. While not without risks, self-funded health insurance plans can give organizations better cash flow, tax benefits, a greater degree of flexibility over the plan’s design and reduced administration costs.
The employer can set the premium rates based on their claims history and adjust the plan in other ways to cut costs. If claims are lower than anticipated the employer can invest any savings and earn interest. In the event that claims are higher than usual, stop-loss insurance coverage can pay for excess costs.
The flexibility of self-funding helps employers use their health benefit plans the way they were originally intended – to attract and retain the finest employees in the industry. Benefits can be customized to meet your employees’ needs and to satisfy company objectives. Mayfield & Associates will help you design your self-funded plan and handle the day-to-day plan administration.
Not just for large employers
A common but mistaken impression is that self-funding is only for large employers. In fact, self-funded medical plans can be prudently set up by smaller employers as well. Our plan design includes setting the appropriate level of stop-loss insurance, which provides reimbursement for large catastrophic claims. Stop-loss insurance allows smaller employers to consider this very economical approach to providing employee medical benefits because it protects them from large claims.
The Advantages of Self-Funding a Plan
One of the biggest advantages of a self-funded medical insurance plan is that it can have a positive impact on the organizations cash flow. To start, self-funded plans are also generally exempt from premium taxes in most states, lowering employer costs in that area immediately.
With fully insured health insurance plans employers pay an insurance provider in advance to cover projected claims, in addition to the insurer’s overhead and administrative costs.
However, in a self-funded plan, the money collected by the organization is only paid out when claims actually occur, and can stay in a reserve account accruing interest until it is needed. In addition, if claims during a particular month are lower than anticipated, that money adds to the reserve and earns additional interest creating a long-term financial benefit.
The fact that employers are directly paying for medical insurance claims also makes wellness programs and other incentive programs more relevant. With fully insured plans, wellness initiatives generally do not result in significantly lower health insurance costs.
However, in a self-funding scenario, an overall improvement in employee health can lead to an immediate reduction in claims, which feeds back into the organization’s reserve fund. If those trends continue, there can be a reduction in the necessary contributions made by both employers and workers.
Another significant advantage for organizations is the ability to customize self-funded plans to a degree. While collective bargaining, agreements may require certain benefits be covered by any employer-sponsored plan, self-funding may allow for some flexibility. This flexibility can also be advantageous in the event an employer’s healthcare requirement or needs change.
In addition, since a specialized third-party provider completes much of the administration of the plan, employers can refocus their internal resources on other relevant issues.
What Type of Employer Can Benefit From Self-Funded Plans?
Generally, most employers today can benefit from self-funding as long as they make an accurate assessment of the costs they are likely to face, set rates accordingly, and are prepared to delegate the administrative responsibilities to a plan administrator. Roughly 55 percent of workers in the U.S. are already covered under a self-funded plan, even though they may not be aware of it.
Self-funding is not a quick fix, and employers should understand it’s a long-term plan that will reap benefits over time with improved control and transparency.
When assessing whether a self-funded plan is a wise choice, factors to study include past coverage utilization, cash flow and the status of the employees being covered. Different employee populations will have their own health characteristics and patterns of care use.
In short, self-funding can benefit both large and small employers by helping them reduce healthcare costs and put those gains back into the organization.
Steps to building a Self-Funded medical plan in Gulfport, Biloxi, Long Beach, Ocean Springs, Hattiesburg, Jackson & Pascagoula, Mississippi as well as Texas, Louisiana, Alabama, Tennessee & Florida.
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