Self-funded employee health benefits are becoming increasingly prevalent as employers seek ways to reduce healthcare expenses, increase plan flexibility, manage risk, and tailor plans to what their workers really want and need.
The self-funded employee health benefits market is a sleeping giant.
Programs in which companies finance their employees’ healthcare with their own assets are becoming increasingly prevalent, as employers seek ways to reduce ever-escalating expenses, manage risks, increase flexibility of their plans, and tailor plans geared toward what their workers really want and need, all within the confines of the Affordable Care Act (ACA).
With organizations’ healthcare expenses are poised to jump by almost 7% in 2015, according to PricewaterhouseCoopers’ Health Research Institute, self funding can be an alternative to help a company control how much it spends on employee health benefits, while providing workers with quality healthcare.
Almost 95% of US companies with at least 5000 employees currently self fund their health benefit plans. However, the industry that was once mostly thought to be only the domain of large companies, like Walmart, Microsoft, and Starbucks, is now changing. Today, the self-funded market, regulated by the Department of Labor and under the protection of the Employer Retirement Income Security Act, now includes nearly 60% of US employers of all sizes.
The ACA is fueling the proliferation of self funding by adding new costs on fully insured plans and eliminating the risks typically associated with self funding. Many self-funded healthcare plans are exempt from new taxes, fees, and restrictions placed on fully insured medical plans by the ACA. So employers with strong financials and stable work forces are increasingly looking at transitioning to self funding their employee benefits.
Some of the benefits that can be realized by developing a self-funded health benefit plan include:
Self-funded plans hold down healthcare costs better than fully insured plans. Once an employer has developed its self-funded program, with careful planning and administration, it can expect to realize, on average, a 5% to 15% savings over participating in a fully insured plan.
We are often asked, “How does an employer interested in self funding the healthcare benefits pursue it as an option?” If a company determines self funding may be appropriate, company leaders should:
There are many important players in the self-funded community, including stop loss carriers, networks, medical managers, wellness companies, legal counsel, compliance companies, underwriters, audit firms, healthcare systems, brokers, human resource managers and consultants. Selecting the right TPA is a critical addition to the team and is critical to the success of an employer’s self-funded plan.