The big news in the world of politics last week was the reported increases employers are facing due, in part, due to insurer costs related to the Affordable Care Act. Media accounts have health insurance exchange open enrollment renewals pegged at an average increase of 28% with some having to pay double their current rates
We will leave it to the politicians to duke it out over the specific causes of the increase and who is to blame. As employee benefit advisors, we prefer to focus on how we can help employers get out from under these significant cost hikes, while still providing your employees with robust, cost-effective benefit packages. One solution that is generating positive results and cost savings for businesses is self-funding their health insurance.
A self-funded health insurance plan is one in which an employer retains the financial risk of covering employees’ health care costs with the option to insure against the cost of catastrophic claims. Contracting with a third-party payer, administrative services organization, or an insurance company, an employer will pay a third party to administer the benefits, pay claims and perform certain limited fiduciary functions.
There are many benefits to self-funding including plan design choice, cost transparency and cost savings. Self-funded employers have much more flexibility in their plan design than insured employers, as they are not subject to state coverage mandates. They also have insight into the actual cost of care, administrative costs and any loaded fees or additional expenses to the plan. Other benefits of moving to self-insurance include eliminating a number of taxes, fees and administrative costs incurred with a fully funded plan.
Once an employer has made the conversion to self-funding, they can achieve savings of anywhere from 5% to 15% depending on their cost structure. Self-insurance remains a powerful weapon in the war on burgeoning benefit costs. Employers who make the change can reap immediate benefits and avoid, or at least slowdown, some of the significant and inevitable cost increases on the horizon.
If your company is in the process of renewing your health insurance for 2017, or if a renewal is on the horizon, we can help. You owe it to your business and employees to talk to us about self-funding. Speak to one of our team of brokers, consultants, underwriters and actuaries for self-funding advice and a free, no-obligation quote. In the end, you may chose to go a fully funded route, but you should know your options especially in light of the projected increases.
Contact us today using the form below to discuss self-funding health insurance further.