Why Your Business Should Explore Self-Insurance
Finding the right health benefit plan for your business and your employees can be difficult. The most important factor is having the right coverage for both parties while also meeting financial goals.
In fact, over 85% of finance executives say having a health benefit plan that offers best-in-class coverage while minimizing risks, reducing costs, and removing their administrative burden is essential to meeting business objectives.
There are many different types of plans to choose from, but what many companies don’t know about are self-insured plans.
A self-insured plan is where a business takes on all the financial risks associated with insurance policies. Self-insured employers pay for each out-of-pocket claim as they are incurred instead of paying a fixed premium to an insurance carrier under a fully-insured plan. They also typically set up a fund of both corporate and employee contributions earmarked to pay health care claims.
The benefits of self-insured plans include:
- The employer can customize the plan to meet the specific health care needs of its workforce, as opposed to purchasing a ‘one-size-fits-all’ insurance policy.
- The employer maintains control over the health plan reserves, enabling maximization of interest income – income that would be otherwise generated by an insurance carrier through the investment of premium dollars.
- The employer does not have to pre-pay for coverage, which provides for improved cash flow.
For Shelly Bragg, CFO of The Patten Seed Company, a Georgia-based seed, and sod company with 470 employees, doing the math on self-insured versus fully-insured plans revealed just how cost-effective it could be. “Over the same four to five years, even if you estimate conservatively, a fully insured premium would have easily increased at least 15% per year,” she noted. “In a self-insured plan, the central role of the finance function becomes even clearer,” said Bragg.
If you’re tired of increased costs, lack of visibility, and lack of control over your employee benefits plan, you should talk to your agent. If you feel like your agent can’t confidently provide a unique plan for your company, we have provided resources on how you can have better benefits, lower costs, and happier employees here.