Explaining the Rise of Alternative Funded Health Insurance Plans
With healthcare costs continuing to rise post ACA, employers are exploring every possible alternative to lower costs while maintaining employee satisfaction. It is often difficult to find an option that does not include an adverse effect on employees and their benefits.
According to the Kaiser 2014 Benefits Survey, 81% of businesses with over 200 employees are utilizing an alternative funded streategy. That might come as a shock but many employers are finding that self-funding is the solution to their growing healthcare problems.
What is an Self-Funded Plan?
A self-funded health plan removes the confines of a typical state regulated, fully insured medical plan. Financially savvy employers can mitigate risk and offer comprehensive employee benefits through an alternative funded plan design. This option is particularly cost-efficient if your business has a favorable employee demographic and 100 or more employees.
Advantages of Self-Funded Plans
- Immediately save 4-6% on premiums thanks to lower state premium taxes and ACA taxes
- Bypass state mandated regulations because self-funded plans need only be compliant with ERISA.
- Complete control over plan design. Provide your employees with the exact coverage you deem necessary.
- Improve your cash flow. Forget about pre-paying for claims and pay for them as they become due.
Larger organizations avoid risk charges, ACA taxes, and state premium taxes. They can increase their cash flow by putting reserves in an interest-bearing account. Multi-state businesses are relieved of the burden of different laws and regulations from each state as they only have to comply on a Federal level with ERISA and can avoid the constraints of some state mandated benefits.
Worried about extreme, abnormal claims that can debilitate your financials? Self-funded plans can be paired with stop-loss coverage to prevent financial turmoil. The stop-loss coverage insures claims over a certain threshold when your business cannot handle the entire bill.
Disadvantages of Self-Funded Plans
Self-Funded Plans are not miracle workers so they do come with a few disadvantages. It is important to weigh the pros and cons of alternate funded plans before making the switch.
- Must contract for claims and other services
- Variable financial risk without stop-loss insurance
- Will not mitigate increasing healthcare costs
- Limits the number of experienced brokers available.