Over the last several years, small and medium-sized businesses (SMBs) have increasingly joined larger corporations in becoming a self-insured employer. The prospect offers many benefits to SMBs, including saving approximately nine percent on contributions to employee health insurance each year and not having to implement state insurance regulations.
Another serious consideration for SMBs is that a diverse workforce needs greater flexibility with the benefits they choose. Not only can a self-insured plan offer employees improved flexibility to choose benefits that work for their family and lifestyle, but employees stand to save significant money as well. In this blog, Firefly Health outlines how to know if your SMB is ready to move to a self-insured plan and things to consider before doing so.
Companies facing this decision need to weigh the flexibility and cost savings of self-insured plans against the administrative burden and potential strain on cash flow when determining if they should make the switch. Below are several factors that may indicate your SMB has reached the point that becoming self-insured would be a solid business decision.
Before you determine that your company is ready to become a self-insured employer, make sure you have a good working relationship with a broker that has helped other SMBs make the transition. Your company’s broker should already have established relationships with third-party administrators and related partners you will need to access regularly.
You have weighed the pros and cons and decided that becoming a self-insured employer makes sense for your SMB. However, you still need to assess and resolve potential problem areas before parting ways with your company’s current health insurance carrier.
One of the biggest risks employers face when opting to go the self-insured route is having to payout catastrophic claims. Your SMB simply does not have the reserves that large corporations have to deal with this type of situation.
The good news is that stop-loss insurance offers a simple solution. Stop-loss insurance represents an agreement with an insurance carrier that limits the amount your company must pay towards employee claims. The stop-loss coverage kicks in once your SMB has paid up to the limit on the policy.
Sometimes SMB benefits administrators have questions about which federal laws apply now that the company has adopted the self-insured model. According to the Self-Insurance Institute of America (SIIA), all laws below apply to self-insured group health plans.
Your SMB must act within the guidelines of each law listed above to avoid claims of discrimination, government fines, or loss of revenue.
As a self-insured employer, your company has the option to process claims in-house or contract with a third-party administrator (TPA) to handle the processing. Working with a TPA can be beneficial in that the outside company can assist your SMB with obtaining stop-loss insurance and self-insured group health plans. TPAs can also help your business obtain contracts with a utilization review service and network providers.
The payroll department at your SMB should still handle deductions for employee health insurance premiums. Instead of sending the premiums to an insurance company, payroll department representatives should put the funds into reserves until needed to pay claims.
Once your company starts paying its own claims, it becomes more obvious than ever that many of the costs incurred by employees are preventable. An employee who visits the nearest urgent care or emergency room for something as common and treatable as a mild case of the flu is just one common example. SMBs also need to consider employee time away from work for routine medical visits such as talking with a doctor about getting a prescription refill.
At Firefly Health, we have advanced from virtual primary care to a virtual-first “care and coverage” health plan well-placed to aid small and medium-sized employers in addressing the overwhelming healthcare costs they (and their employees) face. By building this benefit on our proven care model and innovative technology, we can fix healthcare for those who feel the most pain, without any wasteful administrative complexity.
We invite you to contact Firefly Health today to learn more about our unique and innovative health plan or to schedule a call to obtain more information.