The health insurance debate will be a hot button issue for many years to come. Employers want to offer health insurance benefits to their employees, but the cost can put a strain on their finances. Health insurance premiums continue to rise, and these costs leave little room for employers to offer other wellness benefits in their benefits packages.
Unique benefits like student loan repayment plans often don’t get considered when the cost of health insurance benefits consume most of the organization’s funding for benefits. This is one of the reasons why self-funded health insurance plans are growing in popularity.
What is a self-funded health plan?
A self-funded health plan means that the employer takes on the role of a health insurer. Employees will pay into the plan and submit their claims to the employer, who will pay for any qualified claims. This reduces the overhead costs of skyrocketing premiums but also gives the employer the responsibility of covering claims.
Estimated savings for employers range from $400K to $1M, even after paying claims for their employees. Those savings can be used for other benefits within an organization’s wellness strategy.
Unlike fully-insured health plans, self-funded plans are exempt from many portions of the ACA. The Employee Retirement Income Security Act of 1974 also exempts self-funded plans from state regulations. Employees will only pay for the healthcare services that they need, instead of an entire suite of services that they may never use.
Developing a self-funded health plan
Developing a self-funded health plan can be a daunting task. Employers can use the services of a third-party administrator to help them implement the self-funded plan and manage its operation. Some traditional health insurers, like Medical Mutual and Humana, offer self-funded administration services to employers who want to have a self-funded plan.
With a self-funded health plan, employers pay for the coverage used and nothing more. The plans can be customized to the company’s needs, expanded or contracted as necessary. One way to mitigate the costs of a self-funded plan is to understand which claims the employees use most often and which ones they do not. An organization with mostly healthy employees will benefit the most from a self-funded health plan.
The future of employer healthcare benefits
The overhead costs of traditional health insurance, the fully-funded option, could become a thing of the past.
Companies, like Amazon, are finding new and creative ways to save on healthcare benefits for their employees while also offering a full suite of benefits that attract and retain the best talent. Amazon announced that the company is partnering with Berkshire Hathaway and JPMorgan Chase to offer a better alternative to healthcare insurance for their 1.1 million employees.
Self-funded health plans are one of the best options for providing healthcare benefits at a lower cost for both employers and employees. Other choices may arise in the future.
When employers are saving money on healthcare benefits, they now have the freedom to offer more unique benefits that build a stronger workplace culture and inspire productivity and longevity from their best talent. The future of employer-sponsored benefits begins here.