Fully Insured vs Self Insured… that is the question. The traditional method companies take is to be fully insured. You are covered in a pool with other companies and any exceeding costs are spread out among the pool. With wellness programs becoming more prevalent and data analytics needed to dig deeper into claims, self insured is becoming a more attractive option. Being self insured means you are in control of your expenses… especially if your employees are healthier overall.
As a fully insured employer, you are paying for current and projected claims costs, admin fees, premium tax paid to the state, and insurance company profit. Self insured companies pay for the claims costs, admin fees, and stop-loss insurance, potentially saving a significant amount of money.
By implementing wellness programs & utilizing data analytics, you can take even more control of your healthcare costs by being self insured. Analytics will uncover what’s driving your claims & methods to control them. The wellness programs you implement may prevent potential claims from happening and lessen the impact of chronic conditions on your overall utilization.
Why self insuring makes sense:
1. Reduce overhead costs, such as a 2% annual risk charge that is removed
2. Reduced state premiums because not subject to state premium taxes
3. Exempt from state insurance laws, only subject to ERISA
4. Creating a personalized plan benefits
5. Flex in plan design, administration and offered services
6. Do not have to pre-pay for coverage, pay as they become due
7. Additional cash flow if reserves are held in interest bearing account
By taking control over your group's healthcare you will be able to determine the ROI on one of your largest expenses on your P & L Statements. How are you doing it now?
Written By Ken Kohnfelder, Consultant