By Gregg Lambert
Many employers self-fund their health plans rather than pay high premiums to a health insurance company. Employers appreciate the cost savings realized by self-funding, as well as the ability to exercise full control over all aspects of their benefit plans. To protect themselves from unexpected, large claims, they also separately purchase stop loss insurance.
Until recently, self-funded health plans were the purview of large companies. Small and medium-sized businesses shied away from self-funding because of the additional administration it can require and the perceived additional financial risk it may involve. But recently, many small and medium-sized businesses have been making the shift to self-funding. Driving this trend include:
- Increased taxes on fully insured plans due to government regulations
- Reduced flexibility in plan designs offered by insurance carriers
- Rising health care costs, which are prompting all employers to look for more ways to save
Many of the reservations that employers had about moving to a self-funded arrangement have been addressed with the introduction of level funded plan options – a worry-free approach for employers who want to transition from a fully insured to a self-funded health plan. Level funding offers businesses the predictable monthly payments they prefer. And employers don’t risk overpaying because they receive a refund at the end of the year if payments exceeded their actual claims. If annual payments are less than actual claims, they are covered by stop loss insurance.
Employers who are looking to lower their health care costs would be well-advised to look into a level-funded health plan. It allows an employer to take advantage of the benefits of a traditional self-funded plan while allowing for guaranteed monthly payments.