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Know More about Self Funded Health Insurance

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 Know More about Self Funded Health Insurance
Know More about Self Funded Health Insurance

Know More about Self Funded Health Insurance

Purchasing a health insurance plan has become a necessity for all in modern times. However, ever increasing rates of healthcare services is making people worry how they'll be able to afford it few years down the line. Increase in medical costs also results in increase in health insurance premiums. Total estimated cost of healthcare, today, in the country runs in trillions of dollars. The situation is so out of control that employers are finding it tough to provide their employees a decent insurance plan. Because of this companies today are opting for self-funded health insurance programs.

What is Self-Funded Insurance

A self-funded insurance plan is where a company pools their assets and opts to offer cover for medical costs of their employees themselves rather than involving an insurance provider. As insurance companies by collecting premiums from members do the exact same thing, this idea seems like an answer. But others things covered in insurance provider are: paying claims related to and covered by the plan, administrative costs for maintaining the plan and profits.

Self-Funded Plans Save Money?

Apparently, there are reasons that make self-funded insurance seem like a money saver. Like, the administrative costs might be lower as the businesses mostly have Human Resources personnel that can govern the plan. And the profits earned by a health insurance company can instead be used to help fund the plan and keep costs low.

Right for Everyone

Sadly, self-funded health plans are not ideal for all companies as a company would need enough employees to make it a feasible option. The more employees, the more viable this option becomes because there is more money available to cover the costs of claims.

Specific Stop-Loss Reinsurance

As it only takes one or two catastrophic claims to ruin self-funded plan and leave company open to risk, companies like to purchase Specific Stop-Loss reinsurance. Sounds complicated? However, it's not as the Specific Stop-Loss reinsurance will cover all claims till a specific limit. Therefore, a company can use this reinsurance to limit vulnerability to risk. The higher the pre-set limit, the lower this special type of reinsurance will cost.

Despite having Specific Stop-Loss reinsurance, there's a possibility of a large number of claims falling short of the pre-set limit. The business with the self-funded health insurance plan would be liable for all of those claims unless they had Aggregate Stop-Loss reinsurance. With this special version of Stop-Loss reinsurance, the business is insulated against high utilization rates.

Careful Evaluation Needed

Even if a company has a large pool of employees to make the self-funded plan seem like a good idea, yet careful evaluation is needed before going ahead with this plan. The core demographics of a business will play a major role in any insurance plan, especially a self-funded one. For example, if the average age of workers is low, then the chances for high-utilization may be higher (due to small children). But chances of multiple catastrophic claims are relatively low as compared to a company with a higher average age of its workforce.

Lastly, the type of work actually performed by the business should be factored into any decision regarding self-funded health insurance plans. After all, the risks inherent to a business comprised primarily of white-collar workers will naturally be lower than one that is primarily industrial in nature.

Know More about Self Funded Health Insurance


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