Self-Funded Health Insurance

Self-funded Health Plans for Oroville, WA Small Business

As if there weren’t enough questions surrounding the type of health insurance plans you offer your employees, there’s also the question of how to best fund the program. Fully insured, self-funded, and level-funded health plans can be found throughout every industry, but small businesses tend to face more funding challenges with health insurance than their larger counterparts.

While they aren’t required by law to offer healthcare to their employees, many Oroville, WA small businesses (as defined by the ACA) nevertheless feel inclined to do so. Some choose to do it simply because they want to take care of their employees, while others do it to strengthen their recruitment and retention strategies. Of course, many employers do it for all three reasons.

Regardless of their intentions, employers who offer healthcare to their workforce know the cold, hard facts: health insurance is still ranked among the most important factors for potential employees in a compensation package. Job-seekers see how volatile the individual marketplace is and understand that the most reliable and cost-efficient way to obtain healthcare is still through an employer.

Fully-Insured Health Plans vs. Level-Funded Health Plans

Because fully-funded health insurance plans tend to be expensive for small businesses, many are turning to level-funded health plans, which blend the economic advantages of self-funding with the financial predictability of fully-funded plans. (Author: Jeff Griffin-JP Griffin Group 2018)

With group self-funded health coverage, the risk factors are spread out throughout the group – an individual who is diabetic’s health risks are offset by another member who may never end up using the health plan. This means that those who may have been uninsurable on their own can actually get a policy that works for them. With risks spread out, the overall cost of coverage drops dramatically.

Traditional Fully Funded Health Plan in a Nutshell...

• In a fully insured plan, you pay your premium regardless of whether or not you even use your health plan. The insurance company keeps all money paid to them. Usually comes with an automatic rate increase from year to year.
• In a level-funded health plan, you pay your premium and if your group has a low claims year, you get money back instead of the insurance company keeping it! There are no automatic rate increases.

Level funded health plans also provide Oroville, WA employers with far more flexibility in plan design and are exempt from some ACA regulations. Additionally, level-funded plans give employers access to invaluable data which can inform plan design, such as claims information, unit cost of healthcare statistics, utilization frequency, and prescription data that a fully insured plan carrier will not provide.

Why hasn’t my current broker told me about level-funded health plans?

Good question! Why haven’t they? It’s important that you as business owner understand ALL your options available! Level-funded plans are more complex, and many brokers serving small-group clients have not been trained on their structure, implementation and costs. Another reason is the momentum of fully insured small-group plans. For many brokers, it is just easier to roll their existing, or fully insured plan, forward another year. This isn’t always to the benefit of the broker, not the business owner!

While a level-funded health plan might not be a good fit for your business, it’s always the first place we start at Pacific Northwest Benefits. We look at ALL options both fully-insured and level-funded to insure you’re getting the best coverage at the best price for you and your Oroville, WA employees!

So, the question is why not explore a level-funded plan? With savings of up to 40 percent, protection against extraordinary costs, and the ability to fall back on a fully insured plan, there is very little reason not to do so.

Jason Brown

Emily Rimestad

How Self-Funded Health Insurance Plans Work

The first step to better coverage for your employees is to understand just what self-funded health insurance is. This is a type of ERISA based reinsurance policy that allows groups to take more control over their insurance.

With a self-funded health insurance plan , your monthly payments are placed into an account that is set up specifically for your insurance policy. Then, as employees file claims the funds are withdrawn directly from that account. This is where the ‘self-funded’ aspect comes into play – instead of paying an insurance provider to keep your team fully covered, you essentially fund the medical costs yourself. The insurance provider still receives a fee, but those costs are simply for the administrative work of maintaining your account.

Group Self-Funded Health Coverage

Additionally, these types of self-funded health plans are generally group insurance plans. Group coverage means that individuals don’t have to pay specifically for their coverage. In a traditional single person insurance policy, the individual will be given charges and coverage based on their age, their weight, and their existing health. This means that someone with diabetes or someone who is older or overweight could pay far more for insurance than someone young and healthy.

With group self-funded health coverage, the risk factors are spread out throughout the group – an individual who is diabetic’s health risks are offset by another member who may never end up using the health plan. This means that those who may have been uninsurable on their own can actually get a policy that works for them. With risks spread out, the overall cost of coverage drops dramatically.

Cost Basics

The specific cost of what alternative funding will cost you when you file for coverage largely depends on the employee demographics of your business. The insurance company will begin by looking at factors that impact healthcare needs including things like:

• Number of members to be covered by the policy
• Age and gender of members
• Health issues already present and how they could impact your future claims fund
• Risk factors related to what type of business you have

Since you’re providing self-funded health care to a group of people at your business, you’re able to mitigate risks and lower overall costs. You’ll get an accurate estimate as to what your risk level and your costs should be, and then have that applied to your policy. Over time, the policy costs can be adjusted at renewal if it’s shown that you are paying too much or too little.