By Aetna
As the cost of health care continues to rise, businesses are always looking for ways to control costs without negatively impacting the health of their employees.
There isn’t a one-size-fits-all approach to lowering health care costs, but self-insurance, or self-funded insurance, may be an important consideration for your overall strategy. More and more companies of all sizes are choosing to partner with their insurance companies and set aside funds to pay for the health care needs of just their own employees.
Self-funded plans may be more flexible than traditional, fully-insured plans. They’re subject to less regulation and offer business the opportunity to customize their health care plan to meet their unique business needs. And because companies are paying only for the health care costs of their own employees, there may be money left over at the end of the year that can go toward other business needs.
Talk with your insurance agent to see if a self-funded plan might be right for your company.
Self-insurance is also called a self-funded plan. This is a type of plan in which an employer takes on most or all of the cost of benefit claims. The insurance company manages the payments, but the employer is the one who pays the claims.
These plans are often more flexible for you as the employer because you may not be subject to certain state requirements, and at the end of the plan year, you can get money back.
Self-insurance offers you the flexibility to meet health care challenges and allows you to better manage health care costs.
And you still get the benefit of a network of providers – doctors, hospitals and specialists – with contracts that help determine prices.
Monthly cost: An employer pays a specific amount to be set aside for administrative fees, stop-loss insurance and their employees’ expected hospital and doctor bills each month. The amount set aside reflects the expected costs of the employer’s group of employees. |
Monthly cost: An employer pays and insurance premium. The amount goes into a larger pool of money collected by the insurance company to pay claims across a group of employers. |
Claims payment: Employees seek care from doctors, hospitals and specialists, and get prescriptions at pharmacies in their plan’s national or local networks. The claim bill is paid directly from the monthly expected pool of money. |
Claims payments: Employees seek care from doctors, hospitals and specialists, and get prescriptions at pharmacies in their plan’s national or local networks. The insurance company processes the claim and pays the bill according to the health plan. |
Money back: At the end of the year, the total monthly cost set aside is reviewed against the total claims paid out. Any amount left over is typically split by the employer and the insurance company according to the plan arrangement. The insurance company would retain a certain percentage for administrative and other costs. For example: |
No money back: At the end of the year, the employer does not receive any money back. |
$150,000 Total monthly costs (amount?) set aside at year’s end
-$100,000 Annual claims paid out from set aside costs (amount?)
=$ 50,000 Year-end balance ($15,000 To insurance company for admin. $35,000 Money back to employer)
This is for illustrative purposes only. Exact premium, claims and surplus dollar amounts will depend on the plan arrangement.
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