A Growing Trend
Employers switching from a fully insured plan over to a self-funded health insurance plan is on the rise. And the trend doesn’t show signs of stopping.
A variety of factors are causing businesses to make the switch. These factors include some of the taxes, fees, and requirements for fully insured individuals.
A self-funded health insurance plan, however, allows employers to bring some of the risks back in-house and manage it themselves.
In return, the insurance industry has responded in a number of ways to meet this growing need. One example is that insurance companies have begun providing small employers (around 10 employees) products that were historically for employers between 300 employees.
This alone has provided more access to self-funded health insurance more than ever before.
Why The Shift
Entrepreneurs are often known as being strategic risk takers and competitive. Self-funded health insurance plans have the potential to save employers lots of money compared to being on a fully insured plan.
In fact, companies such as Spooner saved between $300,000 and $400,000 on premiums alone by switching to a self-funded health insurance plan. And this is just one example!
Because of this, more entrepreneurs are taking the chance to switch to a self-funded plan in order to save money, keep money in the organization, and be in control of their company’s healthcare.
The problem occurs, however, when employers switch over to a self-insured plan without collective enough information.
Before Making the Switch
In this episode of Side Affects, McGohan Brabender Shareholder, Anne Marie Singleton discusses the top three things employers must understand before switching from fully insured to a self-funded health insurance plan.
First, employers need to be or have someone internally or a consultant understand their company’s cash flow. Awareness in the financial arena of that business is vital prior to making the switch.
Next, you must understand the profile of your employees. Knowing the demographics and the risk lens of your workforce is extremely important when making your decision.
Lastly, employers need to ask themselves if they’re dedicated to being self-funded long-term.
In this episode, Anne Marie expounds on these three areas more in depth and shares how to answer these three questions before considering the switch.
In this episode of Side Affects, Anne Marie Singleton and Scott McGohan discuss the drawbacks of self-funding, how to better understand a self-insured health insurance plan, and much more.
If you’re an employer interested in making the switch, please listen to this episode to equip yourself with the right tools before making the jump.
Overall, Scott and Anne Marie believe self-funded health insurance is a great opportunity for employers. The most important thing to remember, however, is that you must take the time to craft the correct plan for your business. In addition, it’s important to understand the liability that comes with being self-insured and being able to create the proper structure for your plan.
Listen to Side Affects
Listen to Side Affects episode 034 on SoundCloud
Listen to Side Affects on iTunes
Notes and Resources
As noted by Scott McGohan and Anne Marie Singleton, Self-funded health insurance plans are complicated. When considering jumping from a fully funded to a self-funded health insurance plan
For an employer considering jumping from a fully funded to a self-funded health insurance plan, you need to make sure you are seeking proper advice. A salesperson is not the right person for this role, as selling is not the issue. It’s a risk and liability issue.
Because of this, employers need to meet with a consultant who is willing to unpack all the liabilities to protect your organization, interests, and employees.
To help, Scott and Anne Marie share a few articles below to assist you on your path to learning more about self-funded health insurance.
Because we do not want to make this a one-sided argument and wish to equip you with the full picture of self-funding, we have also provided material on the potential pitfalls of self-funded health insurance plans.
- Self-Funding Overview
- The Rise of Self-funding
- How self-funding health benefits could kill your company
- Factors affecting self-funding for small employers
- Is Self-Funding right for you
Do you or an organization you know have experience going from a fully-insured to a self-insured healh plan? If so, we’d love to hear your opinion on self-insured plans in the comments below.