How Does Self-Funded Health Insurance Work?

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by W. Michael Hurley

Over the past 20+ years I have been servicing companies with their employee benefit packages. I have personally seen the agony small employers and human resource directors trying to provide quality benefit packages. As the costs of health care continues to rise, businesses are always looking for ways to control costs without negatively impacting the health of the employees. But How? Self-funded medical plans may be the answer.

Here are some self-funded basics and valuable points to consider:

Characteristics of a self-funded medical plans – Unlike a traditional major medical plan, a self-funded plan requires that the employer take on fiduciary responsibility for most of the usual costs of medical claims. These claims are paid for using the monthly premiums paid by the employer. If the group has claims which are less than the total premiums paid, then the employer receives a refund of this funds at the end of the plan year. The insurance company takes those funds and manages the payments to health care providers on behalf of the employer. If a catastrophic claim occurs over a pre-determined amount (such as a major accident or illness) the insurer provides a stop loss policy which then takes over the payment of claims. Therefore, the employers maximum financial obligation is never more than the monthly premium.

Benefits of a self-funded plan -

• Much lower monthly premiums over those of a traditional major medical plan.
• Financial protection should claims exceed the pre-determined claim amount.
• More flexibility to customize a plan that meets the company needs.
• Fewer government regulations.
• Opportunity to get money back at the end of the year if claims did not equal the amount of premiums paid.

Self-funded medical plans ARE NOT only for larger employers? While it is true that selffunded plans have traditionally been used by large employers (500 employees or more), currently, that is not the case. We can assist companies with self-funded plans with as few as 2 employees, as well as, companies that have 1099 employees that traditionally could not offer group benefits in the past.

Contact us for an analysis of whether your company could be a good fit for self-funded medical plans. Just one more example of how Hurley Benefit Services is at the forefront of the changes going on in the health insurance industry. Our agency has helped hundreds and has numerous 5 star reviews on google.

Let us help you become the next satisfied customer. Find out more at www.HurleyBenefits.com