Running a mid-sized business is highly rewarding but also presents unique challenges. You don’t have a massive budget like major corporations, so providing health benefits to every employee can be difficult. If you’re ready to make a positive change without breaking your budget, read about how mid-sized businesses have low-risk options for self-funded health insurance.
What Is Self-Funded Health Insurance?
Individual plans for self-funded health insurance may vary, but they’re often more budget-friendly for business owners. Employers provide these plans and accept the financial risk of paying for healthcare expenses out of pocket. They set up trust funds for future claims so there’s always extra money readily available.
Third-party administrators (TPAs) will process the claims and handle the benefit plan. Employers only have to take ownership of each payment. If medical bills exceed the amount set aside in the trust fund, employers can utilize a stop-loss insurance plan to cover the remaining charges.
How Is Self-Funded Health Insurance Different?
Traditional insurance often costs more for small and mid-sized businesses. Employers agree to a specific plan with a locked-in premium. The premium covers the set number of enrolled employees and typically lasts for twelve months. If the business loses employees or the enrollees don’t use their full coverage, everyone still has to pay their monthly premium.
There’s also little to no risk for employers with traditional health insurance. The insurance company assumes total responsibility in covering claims outside of what’s required for enrollees to pay out-of-pocket.
Benefits of Providing Self-Funded Health Insurance
There are a few key benefits to providing self-funded health insurance as an employer or for enrolling as an employee. See if the following factors would make a difference in your financial and professional situation.
More Flexibility and Control
One health insurance plan doesn’t always cover everyone’s needs. People are different, so insurance options should provide flexibility. Self-funded insurance gives employers control over their terms so they can request what their team members specifically need. The TPA in charge of each client will customize the benefits according to the client’s budget.
Increased Financial Savings
There’s no such thing as pre-paying for self-funded plans or paying for insurance that people don’t use. Employers are also free from guaranteed renewal increases that would typically keep people locked into their plans.
If a business unexpectedly loses team members to competitors, self-funded insurance also allows for adjusted specifications. The price people pay when they begin their insurance plan doesn’t have to be what they pay after six months or a year of professional ups and downs.
Lower Monthly Premiums
Traditional insurance charges roughly $495 per month in the U.S., but self-funded insurance plans can charge much less. It may be a better arrangement for employers and team members who can’t afford a traditional arrangement that they may not use very often.
Look Into Your Low-Risk Options
Whether you’re an employer looking for a better financial solution to your health care options or someone seeking a budget-friendly monthly premium, learning about self-funded health insurance gives you more options. They’re low-risk arrangements that often work out well for small and mid-sized businesses, so see if it’s the best next step for your needs.