Removing the Risk from Self-Insurance
Small employers often feel restricted when it comes to their health insurance offerings. In the current Affordable Care Act (ACA) environment, small employers are limited in their plan options and premium arrangements on a fully insured basis. Fully insured small group plans must comply with the ACA mandates when it comes to the benefits being offered and premium arrangements. Although, many small employers have the perception self-funding isn’t an option for them, due to their size and the cash-flow requirement, a number of carriers are offering a variation to accommodate small groups.
With a self-insured plan, the employer bears the risk of all cost incurred under the plan for claims and administration. Claims are paid from the general asset or through a trust established for funding claims. The employer also works with a third party administrator or an insurance company to process claims, and give access to network of physicians and other healthcare providers. With a partially self-funded arrangement, employers get many of the benefits of being self-funded without all the risks. Partially self-insured plans have many of the same protections and benefit that traditional, fully funded insurance plans offer.
As with a fully insured plan, employers still pay premiums. A portion of those premium dollars goes into a claims fund that will be used to pay the first portion of health claims that arise in a group. So as in a traditional self-funded plan, you’re actually paying your employees’ claims. But unlike a true self-funded plan, there’s an “aggregate deductible” for claims. Once that deductible has been reached, the insurer takes over the payment of claims. The remainder of the premium paid is the cost of this aggregate insurance. So really, there’s no risk. Premiums are calculated to fund the claims fund to the aggregate deductible amount. The employer is paying for the worst-cast scenario in a given year.
Another advantage of partially self-insured plans is employers can actually get a refund at the end of the year. If claims are less than the expected amount, employers can be reimbursed or can apply unused funds to next year. So while there’s no risk, there's a possibility of some reward if employees have a good health year.
There’s one more significant reason you should consider a partially self-funded health insurance plan - because they aren’t considered “fully insured” plans, they aren’t necessarily subject to all of the mandates of the ACA. Consequently, these plans may be better value. For more information and to see if a partially self-funded health insurance plan might be right for your organization, contact the ‘A’ Team.
- Partially Self-Funded Medical Plans are Like a Great Chili
- Self-Funded Readiness
- Self-Funding Scare You?
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