Interest in self-insurance has grown in the employee benefits industry in recent years. Traditionally, self-funding was only sought after by employers with 500+ employees. However, in recent years, smaller employers are considering the benefits of self-funding due to the influx of new self-funded products along with beneficial treatment through the Affordable Care Act. When a company decides to self-insure, they forego paying insurance company premiums in return for healthcare and managing their own claims.
There are three components of a truly self-funded plan. The first element is claims which makes up approximately 75% of overall costs. The second, stop-loss, a separate insurance policy that covers catastrophic claims, makes up approximately 20% of costs. The final aspect of self-funding is administration fees, making up about 10% of costs. These administration fees are allocated to a Third-Party Administrator and your benefit consultant.
Precision Benefits Group is well-versed in the various types of self-funding and is a knowledgeable partner in the transition from fully insured.
Hybrid funding is known as self-funding on training wheels. It’s a step towards becoming fully self-funded without the full risk and commitment of making that leap. This is an attractive option for employers at approximately 50 employees, however, there are hybrid funding plans that go down to as little as five employees. While implementing hybrid funding, your business should be compiling its claims data. This will help you determine if your business has good or poor claims history, allowing you to properly roadmap a cost containment strategy with your benefit consultant for years ahead.
A captive is a collection of like-minded midsized employers that come together for the purpose of sharing risk and purchasing power as it relates to healthcare spending. Captive members save money on stop-loss insurance by pooling together and often see a return of premium with favorable claims experience, since each member of the company becomes a part-owner of the captive.
An employer’s participation in a captive also lends itself to sharing costs containment strategies with other members creating smart habits to lower your company’s overall health insurance expenses. Captives are usually selective on which employers can join. Precision Benefits Group is experienced in recommending captive plans for our clients.