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- Providing affordable health insurance coverage is mandated for employers with over 50 full-time employees, but the costs of both deductibles and premiums are steadily on the rise
- A self-funded health insurance plan is one in which the employer requires a premium from the employee and pays all covered medical expenses during the year
- There is a higher risk of financial problems with a self-funded plan unless you add a stop-loss protection policy
- Employers can reduce health costs by educating and giving incentives for healthier lifestyles
- You have the ability to stay ACA compliant with coverage and save on medical costs by using a self-funded health insurance plan
Choosing to initiate a health insurance plan that is self-funded can seem risky for a small business, but it can make sense if you have employees that are younger and in overall good health. Providing health insurance for your employees might be required, but saving money on mandated coverage is possible, with a little knowledge of how the self-funding process works.
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Health Insurance Requirements for Businesses
Offering group health insurance used to be an added benefit to attract a more desirable workforce. Health care reforms have made it mandatory for any business that employees 50 or more full-time and full-time equivalent individuals to provide the minimum required amount of health insurance.
It is stressed to find the most affordable policies possible and employers have to provide information about the ACA marketplace that offers plans. Businesses have been forced into a position of trying to find a way to fit these extra costs into their annual budget.
Costs of Health Insurance for Employees
The costs of providing health insurance to employees have been listed as a critical issue for nearly half of the 20,000 small employer members of the National Federation of Independent Business surveyed in 2015.
The rising costs of premium rates for individual employees rose from $3,886 dollars in 2001 to $5,963 as of 2015, according to a survey completed by the Medical Expenditure Survey Panel.
They also cited a rise in deductible amounts from $597 per individual to $1,541. The costs are even greater for employers with less than 50 employees. The costs are driving many companies to look for alternative ways to come into compliance with new health regulations.
What is a self-funded health insurance plan?
A self-funded health insurance plan is one that allows employers to charge employees premiums for health care, much like a traditional plan. The employer assumes the risk and pays the required amounts for medical services that are used by covered employees.
These plans can be self-administered, or a third-party organization can provide the needed services to keep the plan operational. This is an increasingly popular way to provide employee health plan coverage by larger and medium size companies, although smaller businesses are starting to take a serious look at this alternative form of employee benefits offering.
How does a self-funded health insurance plan work?
As far as the health insurance process goes for the employee, not many things change with a self-funded plan. There will be an opportunity to opt-in to the plan and a deductible will be taken out of the employee pay.
Self-funded health plan covered services can be tailored to match the needs of the majority of employees.
It allows a company to help control the costs. The company will have a designated employee or hire an outside third-party to make payments of all covered claims. This keeps the administrative costs low and there is no wasted money paying towards the profits of an insurance company.
What are the risks with a self-funded plan?
Having a level-funded self-insurance plan is the optimal way to go, especially if you are a smaller business deciding to take on a large part of the risk in managing and covering health care costs for employees.
You assign a set amount of dollars annually, add the monthly premium amounts and this is the pool of money that will be used to pay claims during the year. You can typically get refunded the amounts that remain unused. This works well in most situations, with the exception of catastrophic health events.
There are policies available that can keep a company from suffering a huge financial loss during a time of catastrophic health care costs. When the costs exceed the amounts set aside, the employer has to provide the additional funding to make sure the bills are paid.
An aggregate stop-loss policy will pay all covered amounts over the annual limit by reimbursing the business. This is a great way to protect your financial position with uncertain costs associated with health maintenance, disease remediation, and treatment. There are many levels of coverage when it comes to this type of policy.
How can my company keep costs reasonable with a self-funded plan?
Finding ways to keep costs down with a self-funded health insurance plan are one way to provide the best coverage possible to every employee. Placing an emphasis on being and staying healthy are the best ways to keep the costs of health care to a minimum.
Healthy people tend to need to see doctors and receive treatment less often. Below are a few ways you can push a healthier lifestyle in the workplace.
– Sponsor a Health Fair
Get your employees on board with wellness by sponsoring a local health fair. All types of basic health checks are performed free of charge.
– Membership Benefits
Look for preventative health maintenance and wellness programs that will provide needed services to your employees outside of the traditional primary doctor option. You will save a lot of money in claims costs.
– Healthy Living Incentives
Work with local gyms and nutritionists to offer low-cost services to employees to help promote healthier lifestyles.
– Stop Smoking Programs
Assist employees with programs that help them quit smoking.
– Encourage Stable Work-Life Balance
Educate employees on the importance of a good work-life balance by discouraging excessive amounts of overtime hours and the benefits of healthy foods and proper amounts of sleep. Have equal access to chilled water, rather than sweet drinks and coffee.
Are self-funded health insurance plans the new trend?
Whether a company opts to go the traditional health insurance route or has designs on trying out a self-funded model, the new trend is towards only paying for the services needed and used. There is no better plan to go with, using this model, than the self-funded, choose the services-you-need direction. They are able to better control the costs for a group of employees, offer better premium rates and customize the plans to their particular group.
Staying ACA Regulation Compliant
Never before has the need to stay ACA compliant in offering health insurance options to employees been more critical. The costs of not offering employees affordable coverage that meets minimum requirements can be thousands of dollars a year, per employee.
With more than 50 full-time employees, this can add up to a hefty sum. It is worth taking the time to make sure you can offer a self-funded plan that provides all of the services required to be within the essential coverage limits.
If you have any doubts, you might want to try the more traditional health plan route through the Marketplace or a private insurance agency.
Other than the slightly higher risk assumed by employers and method of paying claims, most people find that a self-funded health plan operates the same as a traditional sourced one. Contact a health insurance professional today and find out if this a better option for providing health insurance coverage to your employees.
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