Would You Use an Employer Health Plan That Wasn’t Insurance?

Group health insurance keeps getting more expensive by the year. As a result, employer-sponsored health benefits are getting out of hand in terms of employers being able to afford them. This brings up a question more companies are asking their employees: would you use an employer health plan that wasn’t insurance?

Most people think of traditional health insurance when the topic of employer-sponsored health plans comes up. They think of things like health maintenance organizations (HMOs), preferred provider organizations (PPOs), and high deductible health plans (HDHPs). But all those options qualify as insurance. What about a non-insurance option? Does it exist? Absolutely.

Self-Funded Employer Health Plans

Although there are a couple of non-insurance alternatives to more expensive group health insurance, this post will only cover self-funded health plans. Self-funded plans are employer-sponsored plans that provide a range of health benefits similar to what employees normally get through group insurance. But while the offerings are similar, self-funded plans are not insurance plans.

What is the difference? A group insurance plan is a plan that is fully funded by an insurance carrier. The carrier is responsible for paying all medical claims. If the claims in a plan year exceed premiums and the returns made on them, the insurance company takes the loss. And as far as administration is concerned, the carrier either handles it or passes the work off to a broker.

Self-funded plans are completely different. According to StarMed Benefits, a Las Vegas company that acts as a third-party health plan administrator, these are the key characteristics:

  • Plans are fully funded by employers
  • Employers make monthly payments to their plans
  • The plans are responsible for paying medical claims
  • Plans are administered either in-house or through third-party administrators
  • Plan shortcomings are on the employer.

In terms of that last point, employers choosing to offer self-funded health plans usually buy stop loss insurance to protect themselves. Should their estimates for the current plan year come up short, the insurance pays the difference. That way, the employer isn’t left holding the bag.

It’s Cheaper for You

Everything you have read thus far doesn’t pertain directly to your experience as a health plan subscriber. But here is where the rubber meets the road: one of the main benefits of self-funded plans for workers is lower cost. A self-funded plan will almost always be cheaper for you than traditional health insurance.

To be honest, this is the whole point of self-funding. Companies do it because they want to provide adequate health benefits while keeping costs under control. They don’t want their own premiums to keep climbing year after year. They do not want that for their employees, either. They implement a self-funded plan to make sure things stay affordable for everyone.

What the Plans Offer

If you are concerned that a self-funded health plan will not offer enough, think again. Most plans are comparable with traditional health insurance for both primary care and major medical. However, it’s important to note that self-funded plans can be very different from one employer to the next. That’s by design. Flexibility is one way of containing costs.

According to StarMed, a typical plan gives employees access to low-cost primary care and prescriptions. Plans tend to cover things like telemedicine visits, well-child visits, and annual physicals. They also cover a certain portion of the bills incurred by major medical events.

If you were offered an employer-sponsored self-funded health plan, would you go for it? If so, you might want to urge your employer to look into self-funding. It is a lower-cost alternative to more expensive health insurance that doesn’t have to sacrifice coverage.

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