As healthcare costs continue to rise, many small to mid-sized companies are exploring alternatives to traditional health insurance. Self-funded health plans, once the domain of large corporations, are becoming increasingly attractive to companies Here’s why more businesses are shifting to self-funding—and how it could benefit your organization.
1. Cost Control and Transparency
With a self-funded plan, your company funds employee health claims directly, rather than paying fixed premiums to an insurance carrier. This approach allows for significant cost control, as you pay only for the claims actually incurred. Many HR and finance teams find self-funding appealing for its transparency—providing clearer insights into where healthcare dollars go and what drives costs. You’ll gain data on employee utilization and trends, empowering you to make informed decisions on managing benefits spending.
2. Flexibility in Plan Design
Self-funding offers the flexibility to design a health plan that meets your company’s unique needs. Instead of a one-size-fits-all model, you can create a plan aligned with employee needs and corporate goals. Want to offer free preventative care, customized wellness programs, or add more mental health resources? With self-funding, you can build these options in, all while controlling costs.
3. Improved Cash Flow
Rather than paying a fixed premium each month, self-funding allows for a pay-as-you-go approach. This can help with cash flow, as companies are not locked into set monthly premiums, which can be especially beneficial for businesses managing cash on a seasonal basis. Additionally, any savings from low claims utilization remain with your organization rather than being pocketed by an insurance carrier.
4. Stop-Loss Coverage Protects Against High Costs
One of the biggest concerns for businesses is exposure to large claims. This is where stop-loss insurance comes in. Stop-loss insurance caps your financial responsibility, limiting the amount you pay for individual claims (specific stop-loss) or for total claims across your company (aggregate stop-loss). With this protection, even smaller companies can enter self-funding without undue financial risk.
5. Savings from Wellness and Preventative Programs
Many self-funded plans invest in wellness and preventative programs that encourage employees to make healthier choices, ultimately reducing claims over time. Healthier employees mean fewer claims and less cost, and self-funding lets companies reinvest these savings into further employee wellness initiatives or other areas of the business.
Making the Transition
Transitioning to self-funding doesn’t have to be overwhelming. By working with experienced benefits consultants, like those at CB Wood Financial, you can develop a strategy that fits your business goals, helps manage costs, and supports your employees’ health.
As more businesses look for ways to make healthcare more affordable and customizable, self-funding offers a powerful alternative. It’s worth considering if this approach could be the right fit for your company.
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