As the cost of health care continues to rise, businesses are always looking for ways to control costs without negatively impacting the health of their employees. There isn’t a one-size-fits-all approach to lowering health care costs, but self-insurance, or self-funded insurance, may be an important consideration for your overall strategy. Companies of all sizes are choosing to set aside funds to pay for the health care needs of just their own employees.
Self-Funded Insurance in Lowering Healthcare Costs
Self-funded plans may be more flexible than traditional, fully-insured plans. They’re subject to less regulation and allow businesses to customize their health care plan to meet their unique business needs. And because companies are paying only for the health care costs of their own employees, there may be money left over at the end of the year that can go toward other business needs.
Self-Insured in Comparison to Fully-Insured
Monthly Cost
Self-Insured: an employer pays a specific amount to be set aside for administrative fees, stop-loss insurance and their employees’ expected hospital and doctor bills each month. The amount set aside reflects the expected costs of the employer’s group of employees.
Fully-Insured: an employer pays an insurance premium. This amount goes into a larger pool of money, collected by the insurance company, to pay claims across a group of employers.
Claims Payment
Self-Insured: employees seek care from doctors, hospitals and specialists, and get prescriptions at pharmacies in their plan’s national or local networks. The claim bill is paid directly from the monthly expected pool of money.
Fully-Insured: Employees seek care from doctors, hospitals and specialists, and get prescriptions at pharmacies in their plan’s national or local networks. The insurance company processes the claim and pays the bill according to the health plan.
Money Back
Self-Insured: at the end of the year, the total monthly cost set aside is reviewed against the total claims paid out. Any amount left over is typically split by the employer and the insurance company according to the plan arrangement. The insurance company would retain a certain percentage for administrative and other costs.
Fully-Insured: at the end of the year, the employer does not receive any money back.
Get Help with Employee Benefits
Employers looking to get started on looking for a new health insurance carrier can do so now, rather than waiting for open enrollment to begin.
To learn more about Payday HCM's employee benefits services, or to see how we are already helping countless businesses with employee benefits and health insurance plans, contact us today.
