Controlling your Healthcare Premiums

In today’s business climate, managers need benefits solutions as resourceful and cutting-edge as the organizations they run. For many employers, pre-packaged fully insured health plans do not provide the greatest value to meet their organizations’ needs. Employers of all sizes are looking to mold their plans around the requirements of their businesses.

There are many reasons employers might eschew a traditional insured plan system. Small and mid-sized employers might want to avoid risk charges, ACA fees and state premium taxes. Large employers may want to administer their benefits plans and grow their cash flow by holding their reserves in an interest-bearing account. Multi-state employers might want to free themselves from the burden of complying with the insurance regulations of multiple states. Employers of younger, healthy workforces may be looking to capitalize on their advantages by saving on health insurance.

Because each business is unique and requires its own set of insurance solutions, diversity in provided benefits plans is needed. For many employers it may be far more beneficial to pursue self-funding as a benefits solution.

While experienced, successful business managers are experts at mitigating risks, many will gladly take on risk exposure if the probability is good for a high payout.

Self-funding Advantages

A self-funded group health plan is one in which the employer eliminates obligations to a health plan provider by assuming the financial risk for providing health care benefits directly to its employees. While experienced, successful business managers are experts at mitigating risks, many will gladly take on risk exposure if the probability is good for a high payout. There are numerous well-documented advantages to self-funding for employers that manage risk well; including:

• Reduced insurance overhead costs. Carriers assess a risk charge for insured policies (approximately 2 percent annually), but self-insurance removes this charge.
• Reduced ACA fees and state premium taxes. Self-insured programs, unlike insured policies, are not subject to state premium taxes. The premium tax savings is about 2 to 3 percent of the premium dollar value.
• Avoidance of state-mandated benefits. Self-insured plans are exempt from state insurance laws, subject only to ERISA compliance.
• Choosing benefits services à la carte
• Flexibility in plan designs, administration and offered services
• Customizable stop-loss insurance to reduce the risk associated with high claims
• Improved cash flow. Self-insured employers do not have to pre-pay for coverage, and claims are paid as they become due.
• Additional cash flow if reserves are held in an interest-bearing account

Complete Customization

Arguably the greatest asset offered by self-funding is the complete freedom to structure benefits according to needs of your company.

 One of the greatest assets offered by self-funding is the complete freedom to structure benefits according to needs of your company. Employers can choose what benefits they want to offer, while opting to insure individual benefits through traditional means or forgo offering them altogether.  Under a self-funded plan, employers can encourage employees to participate in wellness programs that lead to lower claims.  Many employers drive participation by reducing premiums.  They may also add a premium surcharge/increased for those not willing to participate.  Other Examples:  Some companies charge higher premiums for tobacco users, or require an annual biometric screening.  Some may go so far as to carve out dependent coverage.  The best programs are designed around your companies demographics and claims utilization.

The following benefits may be self-insured:

• Health care (indemnity, PPO, POS and HMO)
• Dental
• Short-term disability
• Prescription drugs
• Vision care

  Employers can also make the final call on important variables, such as:

• Eligibility
• Exclusions
• Cost-sharing
• Policy limits
• Retiree benefits

  Employers are also free to administer benefits themselves if they have the resources, or to retain a third-party administrator at a fraction of the cost of a traditional benefits provider.

How Large does my company have to be to consider Self-Funding?

Most advantageous to employers worried about the potential for large claims is the ability to acquire stop-loss insurance, allowing executives to determine their total amount of yearly costs with 100 percent certainty.  Companies as few as 2 employees can get access to a Self-Funded programs, but also know there are various types of Self-Funded programs.  Smaller companies, typically with 200 or less employees may prefer a partial self-funded or “level-funded” program.  This allows them to have 100% certainty of their premiums each month and year, but offers with the upside of retaining a portion of the unpaid claims that build up in reserve.  Most businesses would like to keep the “profits” of the plan rather than pay it to an insurance company.

Want to Learn More?

My Advisor, Inc welcomes the opportunity to help your organization explore if self-funding is right for you or to look at improving your existing self-funding program.

My Advisor, Inc

2121 First Avenue North, Suite 201

Birmingham, AL 35203

P|   205.834.9106

www.GoToMyAdvisor.com