Employer based insurance can be a major perk for both employers and employees. On the employer side, there may be some added costs, but offering insurance packages shows a certain level of care and appreciation for your employees and can help attract more and better talent.
For the employee, insurance packages can save time and money while getting the protection they need. Ultimately, it can be the deciding factor whenever they are looking for new job opportunities.
There are many types of employer-based insurance options, but an often overlooked one is self-funded insurance.
Employers who opt for self-funded insurance can potentially save a significant amount of money on their insurance. This is because the contracted TPA works to meet your, the employer’s, specifications instead of the specifications of insurance providers. This means lower monthly contributions are required to guarantee coverage.
Plus, self-funded insurance plans are regulated by the Employee Retirement Income Security Act of 1974 (ERISA), a federal law, which allows employers to avoid state regulations and taxes. The state health insurance premium taxes can be as high as 2%-3% of each premium payment.
More flexible insurance options
Rather than opting for a one-size-fits-all insurance plan that has unnecessary components and thus costs you extra, self-funded insurance plans can be designed to meet the exact demands of your workforce. Again, the TPA is contracted out to meet your demands first before satisfying the demands of insurance providers. This allows you to customize a solution that works for you. Employers also retain control over the provider or provider networks that fit their needs.
Improved cash flow
Self-funded insurance plans give employers more control over their finances. Instead of incurring a monthly expense, the contributions are put into a trust fund. This gives the employer control over their reserves and the associated interest income
Is self-funded insurance right for you?
There are several benefits to choosing self-funded insurance, but that does not mean it is the right option for everyone. The increased risk means that more financial resources are required to protect both your employees and the company. For medium-sized and larger businesses, this might not be a problem. For smaller businesses though, this can complicate the day to day operations. However, there have been businesses with as few as 25 employees who have successfully maintained self-funded insurance. To discover if a self-funded plan could work for you, it is best to consult with a TPA or insurance expert.