Dive Brief:
- Employers have two main options in funding employee healthcare plans, buying insurance or paying the claims themselves. Self-funding, formerly the domain of larger employers, is getting more and more within reach of smaller companies, according to the Smart Business Network.
- In fact, a PricewaterhouseCoopers Cooper's 2015 Health and Well-being Touchstone survey cited in the article found 66% of employers with 500-1,000 employees currently self-fund health benefits — a 7% boost from the previous year (11% since 2013).
- While self-funding has some risks and is not for everyone, it's no longer hard to do for the right employers, according to Amber Hulme, vice president of Central and Southern Ohio for Medical Mutual, a healthcare insurer.
Dive Insight:
When choosing to self-fund, Smart Business reports, employers must reserve funds and pay claims for all employees and dependents covered by the plan (plus administrative fees). Also, most employers buy stop-loss insurance, an added layer of protection that reduces financial risks should a single catastrophic claim hit (or total claims costs run higher than expected).
More insurance carriers today offer self-funded products for employees with as few as 50 employees. The main financial advantage is employers don't pay full insurance premiums, and if claim costs are lower than expected, employers can invest savings. Hulme suggests using it to boost employee wellness programs. If claims are higher, stop-loss insurance kicks in.
Most of all, Hulme told Smart Business, self-funding requires a long-term strategy and commitment. Claims must be effectively managed and wellness and disease management programs should be part of the equation. And read those contracts carefully, Hulme said.
When considering the self-funding route, owners, HR and benefits leaders need to do their due diligence (customer reviews, RFPs etc.) when selecting a broker, carrier or third-party administrator.