The traditional health insurance market has been beset by escalating care costs and regulatory compliance requirements in recent years. In response, employers are searching for effective alternative solutions to manage the cost of their benefit plans without negatively impacting the quality of medical care. Finding that equilibrium between cost and quality can be incredibly difficult in the traditional insurance market. However, with a self funded insurance plan, that dream can become a reality.
What is a Self Funded Insurance Plan?
A self funded insurance plan, also known as a self insured health plan, is a type of insurance plan in which the employer, not the insurance company, assumes the financial risk of paying for their employee’s medical claims. To that end, the employer designs the plan coverage to accommodate their employee’s specific needs. These may include medical, dental, vision, prescription, or specific industry-related risks.
Instead of paying premiums to an insurance company, the employer then creates a medical claims fund based on anticipated healthcare costs. Then, whenever a claim is filed, the employer pulls funds from that pool.
Although an employer has the freedom to handle the day-to-day administration of this type of plan, many instead entrust admin activities—such as processing claims, billing, and customer service—to a third-party administrator (TPA) such as UltraBenefits. A TPA can help self-funded employers:
- Save money on fixed costs
- Identify opportunities for reimbursement
- Design a policy that aligns with the company’s risks, utilization, and needs
- Leverage technology to improve utilization management and educate employees
What Are the Advantages of Self Funded Insurance?
There are several reasons why increasingly more businesses are switching to self funded insurance plans. Common benefits of self funded health plans include:
- Plan flexibility – The traditional insurance plan is designed for the average person, not the individual employee. As such, a normal plan may be inadequate for your employees’ specific needs. With self funded insurace plans, owners can tailor coverage to align with their unique requirements and risk tolerance. It gives them the option to add or remove coverage options or changing plan design as they see fit. For instance, they can set the plan’s benefit design to cover emerging risks or fill insurance gaps.
- Cost savings – Because the employer assumes the risk, they can negotiate lower rates with healthcare providers. Furthermore, this type of plan is beneficial for companies with strong claims histories and robust risk management policies. If they’re able to control claims losses, they’ll reap underwriting profits and gains, instead of the insurance company.
- Improved access to claims data – Data drives decision-making. Self insured plans provide employers with real-time claims data. This empowering them to identify potential areas for cost savings and make changes that improve the efficacy of the plan. Since employers have total visibility over each claim as it occurs, they can then proactively manage risks and costs.
- Less insolvency risk – Especially when the plan is backed by stop-loss insurance, self funded insurance plans are less likely to become insolvent. This is because they don’t need to pay out large claims to a third-party insurance company.
- Transparent vendor payments – Under the traditional model, there’s little visibility over the carrier’s profits and commissions. However, TPAs tend to have small external margins and transparent commissions—and proactively make this information readily available to their partner.
- Healthier and happier employees – In today’s competitive marketplace, employers need to go above and beyond to hire and retain top talent. And, increasingly, a high-quality health care and benefits package factors into employment decisions. With custom plans, employees can enjoy exceptional ROI from their benefits and work confidently, knowing that their employer has their best interest at heart.
The UltraBenefits Advantage
Self insured plans are shaking up the insurance market, transferring power from the insurance carrier to the employer. Companies that judiciously design and implement a self funded insurnace plan can enjoy greater plan flexibility, cost savings, improved visibility over claims data, and, most importantly, provide a high-quality health and benefits package to their employees.
So, if you need a third-party administrator to help you design, implement, manage, and analyze your self funded health plan, you’ve found the perfect partner in UltraBenefits.
To discover more about our high-quality, cost-effective solutions for employee benefits, contact us today.
