You’ve probably heard the term “self-funded insurance plan” thrown around when shopping for the right kind of benefits plan for your business. This type of insurance plan, which is also called “self-insurance,” can be a viable option for insuring your employees. It offers a distinct alternative to other coverage options and can provide you with significant savings for your company.
If you still have questions about what a self-funded insurance plan might entail, we’re here to help. Contact us today to set up an initial consultation.
What Is a Self-Funded Insurance Plan?
By definition, a self-funded insurance plan is when an employer assumes the responsibility for most, or all, of the costs of benefits claims for their employees. You pay an employee’s claims directly from the money you have set aside for them on a monthly basis. At the end of the year, a comparison between the amounts you set aside each month and the amount you paid in employees’ claims can put money right back in your company’s pocket.
How Is a Self-Funded Insurance Plan Different From a Fully Insured Plan?
A number of factors make a self-funded insurance plan distinct from the insurance plans you may be used to hearing about. Those differences include:
- Cost per Month: In a fully insured program, you pay a monthly premium. This premium is deposited into an existing fund collected by the insurance company to pay claims for many different employers — not just you and your business. However, your monthly cost for a self-funded insurance plan only applies to your employees. The amount goes toward administrative fees, stop-loss insurance, and expected hospital and doctor bills for employees.
- Payment of Claims: Claims occur when employees go to doctors’ appointments, undergo treatment at hospitals or under the care of specialists, and fill their prescriptions at pharmacies. In a fully insured plan, the insurance company would process each claim and pay, depending on the plan selected. For a self-funded insurance plan, claims are paid from the monthly cost you invest to cover your employees’ expected claims.
- Money Saved: For a fully insured health plan, there is no year-end cost savings. The monthly premium you pay to the insurance company stays with them whether your employees utilized all of their available deductible or not. However, this is a key difference that makes a self-funded insurance plan valuable. Self-funded insurance plans review the total cost set aside each month over the course of a year versus the actual costs of covering employees’ claims. Whatever is left over is often split between you and the insurance company based on your initial agreement.
How Can a Self-Funded Insurance Plan Benefit My Business?
Self-funded insurance plans come with numerous benefits for your business. Some of those benefits include:
- The amount you set aside each month is only for employee claims — not a one-size-fits all premium for a fully insured plan.
- Your company’s stop-loss insurance will exceed the monthly amount to financially protect you in case of medical emergencies.
- If you set aside more money each month than you pay out in claims, you will have an opportunity to recoup some of that money at the end of the year.
- Self-funded insurance policies aren’t subject to all taxes and fees, offering your company a money-saving break. Likewise, this type of insurance isn’t subject to certain government regulations that fully funded insurance plans must comply with.
- Self-funded insurance plans offer you the opportunity to craft more flexible benefits packages customized to your employees’ needs.
How Do I Know Whether a Self-Funded Insurance Plan Is Right for My Company?
A self-funded insurance plan might not be right for every company. However, if you assume that it’s not right for your company, you could lose out on some of the most valuable benefits it could have for your business. In fact, even smaller businesses with fewer employees can enjoy the perks that come along with self-funded insurance plans.
If you think a self-funded insurance plan may be in your company’s best interests, give us a call today to schedule an appointment to discuss your options.
Will My Employees Benefit From a Self-Funded Insurance Plan?
Now more than ever, employee benefits are some of the most powerful recruiting and retention tools your business can offer. Prospective employees want to know that your company cares about their health and wellbeing, which in turn ensures company loyalty and hard workers.
A self-funded insurance plan can offer more customized benefits packages for your employees. By crafting personalized plans that fit best with their needs, you can better serve your workers. And with the money you’ll save at the end of the year, you can reinvest into whatever area of your business you choose, further bolstering your employees.