4 Ways Providing Self-Funded Benefits Can Actually Help Your Business

INCREASED CONTROL AND FLEXIBILITY

Typically, when you outsource your insurance needs to an insurance company, you are provided with a pre-made insurance plan. However, when it comes to insurance for your employees, there should not be a one-size-fits-all approach.

Your team of employees may have different needs and requirements. As an employer, you may have some monetary constraints which may affect your insurance plan.

With a self-funded plan, you have the flexibility to design your health insurance plan completely fit for your organization’s needs and the needs of your employees. You work with a TPA to select your own levels of deductibles, co-pays, and the scope and coverage of your insurance plan.

In short, as an employer opting for self-funded plans, you only pay for what you choose.



IMPROVED CASH FLOW

The ongoing pandemic has caused a massive financial crisis for businesses, and preserving your business’s cash flow is the essential thing to do if you want it to survive.

A self-funded plan immensely helps in improving the cash flow of your business. If you have a contract with a large insurer, you pay a hefty premium regardless of the number of claims. With a self-funded plan, you only pay when a claim comes in.

With fewer claims, the money stays on the employer’s books. Additionally, when an employer switches from a fully insured plan to a self-funded plan, they get a one-time cash bump due to a lag in the billing of employee claims.



SAVE STATE PREMIUM TAXES

When you have a self-funded plan, you only pay a premium if you have excess loss coverage. Excess loss coverage means that if your employee has spent more than the limit you have prescribed, the insurance company will reimburse you.

Most of the states charge taxes on insurance premiums, usually 1 to 3% of the total premium cost. Insurance companies include this cost in the total amount of premium charges.



Due to the Employee Retirement Income Security Act (ERISA), self-funded employers cannot state premium taxes and other fees.

DETAILED REPORTING AND ANALYTICS

Large insurance providers do not provide a detailed breakdown of the cost of your employee claims, which means you can be paying for services that may never have been required.

Companies that manage self-insurance or TPAs provide you with monthly and annual reports which show exactly how your money was spent. TPAs have a significant focus on the transparency of the claims.

With these reports, you can stay informed of your healthcare costs and make better decisions to control those costs. The analysis and the trends also help you customize your plan according to your employees’ needs. In this way, you can come up with a plan which not only saves your money but is also beneficial for your employees.