What Is A Self-Funded Plan
Under a self-funded health insurance plan you're responsible for providing health benefits to your employees out of your own pocket. Instead of paying a fixed premium to an intermediary insurance company you pay for claims as they arise. So where does the money come? Your employees will pay you a premium that you would put away into a healthcare reserve. In return they get a card from an insurance carrier that can be used for healthcare, but you do all of the administrative work and pay the bills.
Traditionally self-funded health insurance plans were the domain of large corporations. The cost-benefit analysis just didn't pan out for small to midsize companies. This has changed in recent years thanks in part to the rising cost of healthcare.
Why Choose A Self-Funded Plan?
Self-funded plans offer several benefits even for, and in some cases especially for, smaller employers. Here are a few notable examples:
- More Flexibility. We talk a lot about how each workplace is different. What works best for one set of employees may not work for another. With self-funded insurance you are completely free to create the plan that works best for your employees.
- Direct Control. Having direct control over the reserve of cash for your health coverage allows you to benefit more from interest income. You can invest premiums as you see fit.
- Improved Cash Flow. With a self-funded plan you pay for coverage as it's needed. In many cases this results in improved cash flow as you're not pre-paying for coverage through a premium.
Self-Funded Plans Aren't For Everyone
There are a host of benefits that come with self-funded insurance, but the truth is that it isn't right for everyone. First off it's difficult to self-fund without a healthy cash flow. The money for care has to come from somewhere and in this case that somewhere is your own pockets.
You also have to take into account the risk. What would happen if an employee were to come down with a serious, long-term illness? What if several of them did at the same time? It's not likely but it could happen and you would have to pay for it somehow. There are ways to mitigate this risk, like supplemental insurance and encouraging employees to visit cheaper providers, but at the end of the day the math may not work out in your favor.
Self-Funded Plans And The ACA
Now you might be wondering how self-funded plans interact with the ACA regulations. There's much confusion around the ACA at the moment but rest assured it is still in full effect at the moment, and it's still something that must be considered when dealing with health insurance. While self-funded plans are exempt from certain ACA requirements they must still comply with much of the legislation including coverage for dependent children up to age 26 and the 90 day waiting period limitation.
At Summerlin-Roberts we leverage our expertise as cost containment specialists in order to cut your healthcare costs without cutting functionality for your employees. Please, contact us today to set up a consultation for your business or visit us online to read some of our case studies.