One of the great things about starting your business is the ability to build your own team around you. Whether you have 2-3 employees or several hundred, your employees quickly become like family. One of the best ways to show appreciation to your employees is offering them a variety of perks such as healthcare.
For many who want to provide their employees some form of health insurance, the price tag is often a major factor. Small and even medium sized businesses don’t always have the additional cash flow to cover such expenses. Everything is already tied up in the business.
Fortunately, there are alternatives to fully insured health plans that have those hefty price tags. Self-funded plans can be an affordable and even convenient option for all your team members.
What is self-funded insurance?
Self-funded insurance is exactly what it sounds like. It is self-funded in the sense that the monthly payments that would go towards monthly premiums for a fully funded health insurance plan instead go into a fund that is owned by the business. Contributions are still made by both the employer and the employee.
Each month, 45-55% of those premiums go into an escrow fund, while the rest pays for the insurance policy along with an associated admin fee. The escrow is administered by the insurance carrier.
Initial claims are then paid out of this fund. Once a ‘stop-loss’ limit is reached, any additional claims are paid by the insurance carrier. The only obligation the business owner has is paying monthly premiums. There is no risk of out-of-pocket expenses. And for the employees, there is no difference between self-funded and fully-insured policies, except for the price.
Pros and cons of self funded insurance
The benefits of starting a self funded insurance plan are numerous. The plan improves the cash flow of your business by giving you more control over your money.
- Lower premium for business and employees
- Options for lower deductibles
- Return of escrow funds not used by employees
By working with a broker, you can create a plan that works for you and your employees. Rather than getting a one-size-fits-all insurance option, you can pick and choose the types of coverage you want included or give your employees that choice.
Are you worried about getting hit with a big claim? Don’t! All plans through Healthcare Search include stop-loss protection. Building up your fund’s reserves prior to the launch is another great way to stay protected.
How to set up a successful self funded insurance plan
Switching insurance plans or starting a new one can be intimidating. There are a few things an employer can do to set up a successful plan from the start:
- Know your employees: get to know what type of coverage they need and how much they can contribute monthly.
- Know your options: speaking with a benefits broker can help you better understand what your options are. These include the types of plans, coverage options, and costs.
- Pick the right broker: Brokers are like any other business. There are both good ones and bad ones. The broker is going to help with claims, customer management, and other admin processes. Do your homework to find a broker who is going to represent your interests the best.