Common Reasons Employers Switch To Self-Funding Insurance

The increase in health care costs in the country forces many companies to look for more effective ways to manage expenses on their employees’ benefit plans. Additionally, experts say that overall healthcare costs are expected to increase by an average of 5.5% annually over the next decade.

 What It Is

An option that many businesses consider is self-funding insurance. Generally, it refers to a plan where the employer takes on the financial risk for providing health care benefits to employees.  

This is how it differs from traditional health insurance. Instead of paying a pre-determined premium to an insurance provider, the company will be paying claims out-of-pocket as they are received.

Typically, the company will be setting up a special trust fund specifically dedicated to paying incurred claims in the future. Then, a third-party administration (TPA) will be in charge of processing claims on behalf of the company. Some TPAs may also offer additional services like collection of premiums, provision of utilization review of claims, and provision of overall service for the benefit plan chosen. However, some organizations also choose to complete the claims in-house.

Why Switch to Self-Funding Insurance

There are many reasons why companies switch to this type of insurance. Here are some of the most common:

Offering self-funded plans may also reduce premium taxes. These plans are subject only to the federal Employee Retirement and Income Security Act (ERISA). So, usually, there will be no state mandate costs.

Getting Help

The healthcare industry has changed over time. That means there are new options that arose. However, choosing the right policy can be challenging.

Fortunately, it is not something a company has to face alone. There are reliable companies like National Insurance Partners that are ready to help. Contact us now to find out how your company can benefit from our services.

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