Benefits brokers: have you talked to your business clients about self-funded insurance plans? If not, you may want to consider it. In today’s market, many employers find that the prepackaged health plans offered by insurance carriers just don’t meet their needs. As a result, more and more organizations are turning to self-funded plans.
What Is a Self-funded Health Plan?
Under a self-funded group health plan, employers assume the risk of providing health benefits to their employees rather than relying on a health plan provider. While this may sound like a big leap to some, many business leaders excel at risk management, and taking calculated risks can lead to future success.
If you have clients who know how to manage risks and thrive as a result talk to them about self-funded health plans. They may allow them to mold their company’s insurance benefits to better fit their employees’ need—all while saving money in the process.
Benefits of Self-funded Insurance
For those employers who are risk management pros, there are many advantages to self-funding:
- Employers who self-fund their health plans have a lot more flexibility. They can decide what benefits to offer as well as how to design and administer their plans. This freedom to structure health benefits according to their own needs is arguably the greatest benefit of a self-funded insurance plan.
- Your clients will reduce their insurance overhead costs by eliminating the “risk charge” that carriers assess.
- Self-insured businesses don’t have to pay state premium taxes. That adds up to 2-3 percent of their annual premiums!
- You know all those ACA-mandated essential health benefits? Self-funded insurance plans are not subject to those requirements. So, if your client only has young and healthy employees, they might decide that they don’t need to cover certain benefits because their employees don’t need them. It should be noted, however, that these health plans are subject to ERISA compliance.
- Your clients can improve their cash flow with self-funded plans. Since there is no need to pre-pay for coverage, employers can retain control of their money simply by holding cash in reserve for claims, paying them as they are due. Additionally, employers can hold that reserve cash in an interest-bearing account to generate a little income.
Which Benefits Can Employers Self-insure?
We’ve been talking a lot about health care, but there are actually several benefits that your clients may want to self-insure:
- Healthcare
- Dental
- Short-term disability
- Prescriptions
- Vision
How Does It Work?
Understandably, your clients might feel a little intimidated at the thought of administering an insurance program. After all, insurance carriers have decades of experience and hundreds of employees to make the magic happen. How can an employer in a completely different industry keep up?
The good news is that employers can self-fund their insurance plans without becoming insurance administration experts. They are allowed to hire third-party administrators at a fraction of the cost of a traditional benefits provider.
Additionally, many employers may be concerned about the prospect of a large claim coming in when they don’t have enough cash in their reserves. In that case, employers can purchase stopgap insurance. That way, they’ll know exactly how much the plan will cost them per year.
As you can see, there are a number of advantages to self-funded health plans. If you have a few risk management pros on your client list, let them know about this option. And, if you need more information, check out the content we have available in Broker Briefcase®. Zywave has presentations, brochures and other resources you can use to educate your clients about self-funded insurance plans.