When your business is offering healthcare to your employees, there are a few options beyond the traditional health insurance model that may be worth considering. One alternative arrangement that may be beneficial to your company is a self-funding model.
When your business is offering healthcare to your employees, there are a few options beyond the traditional health insurance model that may be worth considering. One alternative arrangement that may be beneficial to your company is a self-funding model. New City Insurance can help your company provide the best coverage at the best price to you.
What Is Self Funding?
With a self-funding insurance model, your business will pay your employees’ claims out of pocket instead of paying a full set premium. Although it may sound risky on the surface, your business will continue to partner with carriers, who will set a maximum limit per employee and pay for additional claims exceeding that amount.
Employers typically create a trust fund that will payout for the claims. A self-funded employer can choose to administer their claims in-house or subcontract the service out to a third-party administrator.
Who Should Consider A Self Funded Insurance Model?
Self-funding has a lot of benefits, but that does not mean it is suited to all businesses. It should be thought of as a long-term strategy that can be used by employers who would like to know where their healthcare dollars are going and who wish to keep the extra funds that are not spent on healthcare claims.
Self-funding insurance models need a consistent cash flow to pay employee claims, so it is important for those choosing a self-funded insurance model to provide the funding upfront.
Benefits Of Self Funding
There are several important benefits that your company may enjoy with a self-funding model. Here is a look at a few of the key advantages.
Flexibility
With a self-funded plan, employers can customize their plans to fit their employee’s needs. By breaking apart the traditional health insurance models, you are able to choose from different vendors to find the best fit for your company. Self-funded plans are also exempt from state insurance laws. These laws typically mandate certain benefits that insured plans need to hold. Without these limitations, the plan can be adaptable to address certain requirements for your employees.
Prescription Customization
With a self funded insurance model, prescription benefit managers can help your company to find areas where costs can be contained in terms of prescription usage.
The plan’s administrators can help your business to find new opportunities to keep prescription costs under control, even as more specialty drugs enter the market and usage rates rise. This often works out to be cheaper than a one-size-fits-all insurance policy.
Price Transparency
Companies that use fully insured arrangements with fixed costs may not end up knowing how their actual claims stack up against the premiums paid. By just buying into a plan, you may not be getting the best value for your money. Not choosing your vendors leave rooms for insurence companies to add on expenses that you don’t need to be paying. With self-funding models, however, your business will have complete transparency into each claim that is filed so the costs can be actively managed to find greater savings. Also with a self funded plan, your company will have full transparency of your monthly spending, by having a set premium per employee per month. This plan allows for you to plan your cost based on your number of employees and stay within that budget each momth.
Improved Cash Flow
One of the biggest reasons many employers choose a self-funded model is improved cash flow. There is no need to prepay for potential claims via monthly premiums, and it is even possible to end up with extra savings should your employees make relatively few claims throughout the year.
Learn More About Self Funding and Self Funded Insurance
To learn more about self funded insurance and find out whether it could be a smart choice for your business, speak to the insurance consultants at New City Insurance. Please give us a call at 888.210.2759 or request a consultation online to learn more.