When it comes to attracting and keeping quality employees, access to an excellent healthcare plan is a major factor. It then makes sense for employers to invest in good health insurance. With rising healthcare costs, however, particularly in some states, many companies are looking for ways save on insurance premiums while still being able to provide adequate coverage for their employees. Enter self-funded health plans.

It’s estimated that 150 million people in the US are on their company’s health insurance. Of that 150 million, about 61% are covered by a self-funded or partially self-funded health plan. This reflects an increasing trend among companies to finance their employees’ health benefits, instead of subscribing them to insurance policies funded by big insurance companies.

There is clearly an advantage for companies to fund their own health plans, but what’s the draw and how do they set it up in the first place? In this article, we’ll talk about what makes self-funded health insurance attractive to employers. We’ll also talk about what things companies need to consider and prepare for in implementing their own health plan.

Benefits Of A Self-Funded Health Plan

Following are the most common reasons why companies decide to shift to self-funded health insurance:

1. Companies on self-funded health plans only pay for the medical services and health benefits that their employees actually use. This is in contrast to taking out a more traditional policy with an insurance firm, which requires companies to pay premium rates regardless of whether the health benefits are utilized by employees. This benefit would be of particular interest to companies, which has one of the highest health insurance premiums nationally.

2. Employers have more control over the plan, allowing them to adjust and customize it based on employees’ needs.

3. There is increased transparency of claims data, giving employers insight on common medical expenses. Companies may leverage this data in order to create wellness programs that help employees live healthier lives and prevent the onset of common chronic conditions.

4. Companies create significant savings from reduced premium taxes and avoiding state mandated benefits.

Key Considerations Before Switching To Self-Funded Health Plans

Ultimately, there are two key factors companies must consider before seeking to finance their own health insurance.

The first consideration is the people who will be covered by the health plan. How many staff will your company need to insure? Are most of them reasonably healthy or are a number of them at significant risk of developing a chronic medical condition?

Chronic illnesses can be quite costly to manage, and you must be prepared to reimburse employees with their resulting expenses. for instance, suffers huge economic loss every year due to the prevalence of chronic diseases among its populace.

The second factor is your company’s preparedness to handle shock claims. Shock claims are excessive medical expenses arising from unforeseen and catastrophic medical conditions (e.g. major accidents, critical illness).

To prevent your company from the negative impact of shock claims, you may consider getting stop-loss insurance. Stop-loss insurance will help you pay for medical expenses that are above your health plan’s benefit limits.

Workflow For Establishing Your Health Plan

In general, you need to take the following steps in implementing your company’s self-funded health insurance:

1. Create a work plan detailing your time frame for establishing the health plan, as well as tasks and deadlines for gathering necessary documents and coordinating with stakeholders.

2. Work with professionals to draft your health plan document. You may also want to appoint a third-party administrator for your health insurance.

3. Finalize your health plan policies and coverage. Double-check that your policies comply with relevant laws and regulations.

4. Get Stop-loss Insurance to mitigate the financial risk of funding your employees’ health benefits.

5. Coordinate with third-party administrators and draft service agreements.

6. Publish your health plan’s description and summary of benefits and coverage. These documents must be circulated to your employees.

7. Consider getting Fiduciary Liability Insurance to mitigate risks of policy mishandling.

8.    Look into establishing wellness programs to encourage employees to live healthier lifestyles and prevent disease.

If you’re interested self-funded health insurance and would like to learn more, our team at National Insurance Partners Inc., are ready to assist.

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