The cost of health insurance coverage has many employers wondering what they can do to control rising costs while offering their employees the financial protection of “good insurance”. Despite the ability of business owners and their leadership to effectively manage every other aspect of the business, making smart decisions about health insurance benefits can be one of the most daunting tasks facing the business each and every year.
Across the country the dreaded time of year; awaiting the news from their broker of what the double-digit increase in cost will be to offer the same if not less attractive benefits to their employees. With each passing year more and more employers are asking themselves if this is the year that they consider self-funding.
According to a 2020 Kaiser Family Foundation study, 67% of U.S. employees are now in the self-insured plan which is an increase of 3% since 2017, of course, these tend to be larger employers. Smaller employers are increasingly looking at their options a bit closer and they are finding that they have choices including the fact that a Level Funded plan might be a first step towards being self-funded.
HEALTH INSURANCE COVERAGE OFFERINGS FALL INTO THREE CATEGORIES:
· A Fully Insured Plan is what most
of us think of when we think about employer-offered health insurance. The employer and employee pay a monthly premium, the employee gets an insurance card, and the insurance company processes and pays all claims.
· A Self-Insured Plan has been around for many years. Nearly opposite of Fully Insured, an employer sets aside a pool of money to pay for expected medical care costs and accepts the risk that the cost will not be higher than the pool of funds set aside. Given this risk, the employer will often purchase “Stop Loss” insurance to cover amounts exceeding the pool.
· A-Level Funded Plan is less familiar to most employers and employees. These are plans structured very similarly to Self-Insured Plans but have key differences with the most important being that stop-loss coverage is initiated at a much lower cost threshold than traditional Self-funded stop loss.
With their ability to be tailored to the specific population of employees and the lower cost threshold, Level-funded plans are becoming the stepping stone that many smaller companies have needed to save on insurance premiums immediately while also putting them on a transitional path towards becoming Self-funded. The transparency of provided claims analytics data gives employers direct insight into what benefits package makes sense for their employees versus potentially costly items that employees are less interested in or don’t need. It also allows the employer to control costs due to lower premiums and the opportunity for shared savings that have traditionally comprised the roughly 25% profit appreciated by insurance companies selling a Fully Insured Plan.
Benefit management consultants can often provide employers with objective guidance on what health coverage option makes the most sense and assist leaders in charting a path to a more cost-effective model.
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