Why more employers need to choose self-insurance




Calistri

Calistri

With health insurance premiums so high, most business owners are looking for ways to cut costs while still offering their employees good, competitive benefit plans.

In the last few years, many large companies have achieved both goals by moving from traditional fully-funded employee benefit packages to self-funded plans. In fact, the Self Insurance Educational Foundation has estimated that employers who choose self-funded plans rather than fully-insured plans save approximately 10 to 25 percent in non-claims expenses.

Now, an increasing number of small to mid-sized companies are also starting to enjoy the benefits of self-funding due to recent innovations, such as the availability of level-funded plans.

Predictability and savings

Why are level-funded plans so attractive to these employers? Among other things, they offer both predictability and cost savings, since they allow employers to pay a fixed or “level” monthly fee (independent of their workers’ claims), while also rewarding them with a full or partial refund if claims are below expectations. (If claims are exceptionally high, the employers’ stop loss insurance kicks in.)

Two of the reasons that level-funded plans generally cost less than traditional plans are that they do not include marketing costs and they have lower administrative costs. They are also exempt from premium taxes and state insurance regulations.

Customized benefit options

Unlike traditional insurance, self- insurance allows employers the flexibility to create benefit plans that better match their employees’ needs. For example, a company with young employees might need more maternity benefits, while a company whose workers do physical labor might want more coverage for injuries. As a result, employees are able get more of what they need, while their employers are able to cut costs.

Transparency and managed care

Another cost-saving feature of level- funded plans is their transparency of claims data. Unlike business owners with fully-insured plans, those with level-funded plans receive periodic claim activity reports, which show them how their healthcare dollars are being spent. This information allows employers to better manage their employees’ care.

For example, if they see that their employees are going to hospital emergency rooms for conditions that are not life- threatening, they can tailor their plans to incentivize the use of urgent care centers, which are less expensive. They can also design plans that encourage workers to get many common medical tests at doctors’ offices, rather than hospitals, and make other changes to reduce healthcare costs.

Employee engagement

Many level-funded plans also offer a variety of special services that can save employers money by motivating workers to take an active role in their health care.

For example, wellness programs encourage a healthy lifestyle and can include on-site risk assessments and professional coaching. Telemedicine, which enables employees to have online medical appointments instead of visiting clinics, is convenient for employees and a big money saver for employers (this is particularly popular among younger workers).

Other services include medical advocacy programs, which help employees select specialists, facilities and prescription benefit management services, which encourage workers to choose mail order drugs and generic alternatives rather than expensive brand-name drugs. Some plans also offer members a 24/7 nurse hotline.

Because of their cost savings, flexibility, transparency and other features, level- funded plans are allowing many business owners to keep talented employees by continuing to offer excellent comprehensive insurance plans, while still improving their bottom line. But despite their many advantages, these plans would not benefit every company; if you are considering self- insurance for your business, consult with an experienced health insurance broker to help you evaluate whether this would be the best option for your firm.

Jerry Calistri is president and chief executive officer of Swift Kennedy & Associates, a health insurance brokerage firm with offices in DuBois, State College, Williamsport and Wilkes-Barre. He has over 20 years of experience in the employee benefits industry, including working at the Pennsylvania Employees Benefit Trust Fund and at Geisinger Health Plan as a Regional Sales and Operations Manager. As a Certified Healthcare Reform Specialist, he has conducted seminars about healthcare reform for employers, local chambers and small business development councils. He is an active member of the National Association of Health Underwriters and former president of its Mid Penn chapter, as well as a PAC board member for Health Agents for America. Jerry can be reached at jerry@swiftkennedy.com. .

One response to “Why more employers need to choose self-insurance”

  1. Millie Hue says:

    Thanks for pointing out that doing so will give you more personalized choices especially to address the different risks in each department. I will share this with my mom since she will be having her own company next year. As of now, her establishment is still being constructed.

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