Deciding to implement a self-funded health plan for your business is a big step. If well-executed, sponsoring your own health insurance can pay dividends compared to going with the more traditional route of subscribing to fully funded insurance.
Depending on your business size and financial capacity, as well as where your operations are based, a self-funded health plan may be the more advantageous option. This is particularly true if you’re located in a city that has one of the highest insurance premium rates nationally.
While cost-effectiveness is a major factor in attracting more businesses to fund their own health plan, employers need to carefully consider the responsibilities and duties that come with self-funded health insurance. In this article, we’ll discuss such considerations and give tips on how to go about setting up your own health plan.
Responsibilities Of Employers In Self-Funded Health Plans
Sponsoring your own health insurance means that your business is responsible for maintaining enough funds to pay for your employees’ health benefits. Every time a staff member puts in a health claim, your business is directly responsible for making paying out that claim and reimbursing your employee for qualified medical expenses. Before you take on a self-funded health plan, you must consider your business’s financial position to fulfill such responsibilities.
One of the big factors you need to consider when it comes to the financial viability of setting up your own health plan is cost. Healthcare costs can vary from state to state. States have some of the highest healthcare expenditures per person.
Although self-funded health plans can be more cost-effective than fully funded insurance policies, it may also be a good idea to take a look at health insurance premium rates in your area. Doing so will give you an idea of potential insurance costs per person. Some states have higher premium rates than others, so you might need to consider higher insurance limits when you set up your own plan.
You also need to consider the group of people who will be covered by your health plan. How many employees are under your care? What are their healthcare needs? Does their line of work associated with higher levels of hazard risks? Collecting data to answer these questions is the first step in setting up your business’s health plan.
Collecting Data For Your Health Plan
In determining the kind and level of health benefits you want to provide your employees, you must gather information about their healthcare needs. To do this, you can:
- Conduct a company-wide survey
- Go over your business’s past insurance records. Study the kind of claims your business has filed with your insurance provider in the past two years. Determine the average amount of claims per month, as well as the highest and lowest limits of approved claims.
Consult With A Third Party Administrator
While your business will be responsible for funding health insurance claims from employees, the processing of such claims should be hired out to a Third Party Administrator (TPA).
Apart from administering your health plan, your TPA also plays an active role in setting up the plan itself. Most importantly, they should be able to give you expert counsel on the following:
- Stop-Loss Insurance – Stop-loss insurance protects your company from the long-term financial burdens of paying out catastrophic health claims. Your TPA will be able to help you obtain this coverage.
- Network of Healthcare Providers – Your TPA should also be able to recommend networks of healthcare providers and practitioners that best suit your employees needs.
Formalize Your Health Plan
Once you’ve settled stop-loss insurance and decided on your healthcare network, the TPA will draft a formal document describing the benefits and conditions of your health plan. Before signing off and communicating the plan to your employees, carefully study the document first. You should also have your legal counselor review the document.
If you need guidance in setting up your business’s health plan, we have an expert team ready to assist you. Contact us today at National Insurance Partners.