Self-funded health plans have proved their worth in the more than 12 years since the Affordable Care Act (ACA) became the law of the land. As a lower cost health insurance alternative, an MEC- and ERISA-compliant plan can offer subscribers comparable coverage without such a large financial burden. So why do so many employers look at self-funded plans only to be scared away?
The most likely culprit is a lack of reliable information. Needless to say that there is a lot of misinformation out there, misinformation that gives employers a false impression of what self-funded plans is all about. For example, five things that scare employers away from self-funded health benefits are described below. If employers knew the truth, they would probably find self-funding a lot less intimidating.
1. Unwarranted Liability Fears
The whole concept of self-funding brings with it certain liabilities. In terms of health benefits, a company that sets up a self-funded plan is taking on the liability that comes with paying all claims made against the plan. This causes some employers to fear the consequences of not being able to pay claims. But such fears are completely unwarranted.
According to StarMed Benefits, a third-party plan administrator based in Las Vegas, companies that establish self-funded health plans also purchase stop loss insurance. Stop loss insurance protects against financial losses resulting from excessive claims. In the end, an employer will never pay more to cover claims than its plan allows for.
2. A Perceived Inability to Estimate Costs
Estimating healthcare costs for the coming year is a normal part of maintaining a self-funded health plan. Companies create estimates so that they know how much money to set aside to maintain their funds. Estimates also influence employee contribution amounts.
With the help of an experienced administrator like StarMed, estimating the costs for a given plan year is not as hard as it sounds. And with each year a company maintains a self-funded plan, it gets easier to come up with a fairly accurate estimate.
3. Concerns About Administration
The very definition of self-funding leads many businesses to believe they need to administer their plans in-house. Companies can do so if they wish, but it is not necessary. StarMed and its many competitors can handle every aspect of plan administration, thereby allowing employers to concentrate their efforts elsewhere. Plan administration is probably the one thing employers do not have to think about at all.
4. Selecting the Right Benefits
By their nature, self-funded health plans are designed to be customized. This is generally considered a good thing. But to a company jumping into the self-funded pool for the first time, the task of customizing can be overwhelming. The task is made easier with the help of a third-party administrator or an experienced benefits broker. And by the way, brokers can be an immense help in choosing the right self-funded plan for given employer.
5. Fears of Inadequate Benefits
Hand-in-hand with selecting the right benefits is the fear of offering benefits employs will ultimately deem inadequate. This is an understandable fear given that so many opponents of self-funded health benefits try to make the case that the plans do not compare to their fully insured counterparts. But truth be told, a well-designed self-funded plan offers more than adequate coverage that, in some cases, can be even better than traditional medical insurance.
Employers looking for a lower-cost alternative to fully ensured health benefits should take a serious look at self-funding. There really is nothing to be afraid of. Self-funded health benefits get the job done at a lower cost.