Why Some Employers Prefer Self-Funding Health Insurance
As president of AJM Associates, Karl J. Ruth Jr. works closely with self-insured clients on a continual basis and has been integral in the data driven conversations on what makes their health plan remain successful. Data is the first step to better understand how to plan for long-term healthcare solutions and an improved bottom line for both the employer and employee. In this BLOG, he shares the top 3 reasons employers remain or move to self-funding. Continue reading for the top 3 list.
For more information or to contact AJM Associates, visit www.ajmassoc.com or call (248) 778-6070
Let's start with the number one reason we hear from our self-insured group as why they are self-insured....... COST MANAGEMENT
Being self-insured allows the employer to control plan designs and changes needed to manage their healthcare spend. This in turn allows them to develop long-term strategies by monitoring utilization, high cost prescription medications, discounted provider arrangements and to encourage wellness initiatives for smart health choices. Getting away from the standard large group cookie cutter plan designs allows the employer to address specific employee needs and company objectives.
#2 - Lower Cost of Administration. Built into full-insured rates is the profit margin and risk charge of an insurance carrier. This includes insurance company overhead, commissions, reserves, projected claims costs and taxes. As a self-insured group the employer assumes direct responsibility for financing claims and only pays for health care claims their employees actually use. Leading to improved cash flow held hostage in traditional fully-insured plans.
#3 - Tax Savings- Self-insured plans are exempt from many PPACA requirements,. In certain states there are no premium taxes on self-funded plans. You can also save on ACA taxes and fees (i.e. Medical Loss Ratio Rules, Annual Insurance Fees, and Insurance Premium Restrictions) thus lowering your Health Insurance plan financial exposure.
Self-insuring is not for everyone though. Conceptually speaking, a self-funded plan should be more cost-effective than a fully-insured plan due to the elimination of many expenses associated with a fully-insured plan and the potential of direct savings to the employer from better than expected claims experience. The converse is also possible and self-funding may not reduce costs at all.
This is were the saying Risk vs. Reward comes into play! If you are looking to take that next step and explore your options on what the right choice is for your company, you'll find AJM Associates here, ready to help you every step of the way in managing your costs, minimizing your risk and maximizing your savings.