With higher premiums and insurance carriers leaving the ACA exchange, some people are frustrated with their health care costs. The volatile insurance market has greatly affected businesses that offer benefits and those that planned on offering employee benefits. Large corporations may be able to cope with the changing health care rates, but many small business owners and entrepreneurs are suffering from them.
For that reason, we wanted to share the different plans that small to mid-sized businesses can utilize to cut their health care costs. Hence, we analyzed the three common health plans that businesses use to offer employee benefits: the fully insured (fully-funded) health plan, the self-insured (self-funded) health plan, and the level funded health plan.
Fully Insured (Fully-Funded)
- The traditional employer-sponsored health plan method
- The company pays a flat monthly fee to their insurance carrier who will carry all of the risk
- The more employees that enroll, the higher the monthly premium; however, the premium can’t be reduced more than the fixed monthly fee
- The employees and their dependents are responsible for their deductibles and co-payments
- Employers manage their own health plan and carries all of the risk that an insurance company would usually have
- Ideal for larger businesses due to the greater number of employees and cash expenditure to protect against high claims
- Utilizes a fixed cost and a variable cost
- Fixed costs are for administrative fees, stop-loss insurance, etc.
- Variable costs are for claim payments which depends on the group’s frequency of use
- Provides stop-loss insurance to protect the employer(s) from sudden high claims that exceed the predetermined level of cost
- A hybrid between a self-insured and fully-insured health plan
- Must pay a steady monthly fee for claims funding and administrative costs
- The plan also offers an individual and aggregate stop-loss insurance
- After a year, the TPA totals the amount of dollars placed into the fund and refunds the difference to the employer in the form of a premium holiday
- A low-risk method that pays the medical expenses used by employees and dependents (self-insured plan) and utilizes a monthly level contribution rate (fully insured plan)
All three health plans are great solutions when it comes to saving money on health care. However, one plan doesn’t fit all, so business owners must find the plan that best fits their needs. That being said, level funded insurance is becoming a popular choice for many small business owners because it provides the advantages of both a fully insured and self-insured plan. Either way, business owners must find out their health care needs, budgets, etc. to properly decide on a plan that will benefit them the most.