A significant percentage of mid-sized companies and small organizations offer fully insured employee benefits plans to those working for them, which allows the employer to fund health and welfare insurance plans. As opposed to fully insured, where an insurance company takes on the risk of payment for the claims of the covered group of employees, in self-funded plans (also known as “self-insured plans”), that responsibility falls on the employer.
The monthly premiums typically collected by the insurance company, are collected by the employer typically working with a TPA or third party (benefits) administration company. take care of claims based on the terms of the policy. The employee covered with these employer-funded health and welfare benefits is responsible for all co-payments and deductibles as described in the benefit plan documents.
Benefit Plans and State-Mandated Regulations
Benefit plans are normally regulated under state law and find themselves subjected to rules that govern mandatory benefits, network adequacy, communications, and prompt payment of claims. Insurance plans funded by employers are covered by ERISA and not subject to the dictates of legislative dictates of every state where a company has employees. The states can’t tell your company which health and welfare benefits to include or to remove.
Considering Self-Funded Plans
Many mid-sized companies with at least 100 employees may find that their healthcare coverage needs are more cost-effectively served when they switch to a self-funded insurance plan. When a company purchases a self-insured healthcare plan, the employer offers health and welfare benefits to all its employees. Worries about the increased risk of catastrophic medical claims are largely unfounded because well-designed self-insurance plans purchase medical stop loss coverage from reinsurance companies to cover the potential cost of unusually expensive medical claims.
Factoring In The Costs
Self-funded plans place cost sharing arrangements on the employees. This means everything that comes from co-payments, deductibles, and employee monthly contributions and the individual. The overall cost of the self-insured plan consists of the health and welfare benefits claims paid out to healthcare providers, stop-loss premiums, administrative fees, etc. It isn’t uncommon for employers to hire a qualified administrator to process all of the claims, which helps things stay more organized and qualified.
Making The Right Decision For Your Organization
One of the reasons why employers seek the assistance of employee benefits consultants is that very simple questions layered one on top of the other soon add up to some pretty complex scenarios.
Benefit Plan funding alternatives depend upon factors like employee population demographics and statistics, employer’s strategic HR objectives, and the fiscal health of the employer organization among other things.
Other layers of complexity are introduced in answering questions of benefit plan design – PPO vs. HMO, self-insured vs. fully-insured, defined benefit approach vs. defined contributions and much more.
Ultimately, there are many strategies for offering competitive health & welfare benefits to employees, while meeting business goals. A simple conversation with an actuarial consultant can be a useful first step for HR executives at small and mid-sized companies looking to go the self-insured route.
Learn more about self-funded plans and other strategies for mid-sized employers. Organization can take advantage of full service health & welfare benefits consulting.