According to an article by Collective Health, nearly 1 in 2 Americans – that’s 151 million of us – receive our health care coverage through an employer-sponsored health benefit plan. Of those, 3 out of 4, or about 108 million of us, receive health coverage through a self-insured employer plan. This means that the employer bears the financial risk of paying for the health care of its employees and their dependents. To learn more about the difference between a Self-Funded Health Plan and a Traditional Health Plan, see our blog post here.
As a result of recent health care costs, the percentage of employers who have chosen to self-insure their employee health care plans has accelerated over the past two decades.
Employers are motivated by the prospect of lower costs, greater plan flexibility and enhanced plan design.
To put this into perspective…
Collective Health reports that in 1999, only 60 percent of U.S. employers with 200 employees or more self-insured their health benefits. By 2017, that number has risen to 79 percent. Today, 90 percent of covered workers at firms with 5,000 or more employees are on self-funded plans.
What are some advantages of a Self-Insured Health Plan?
According to the Self-Insurance Institute of America, the most common reasons employers decide to choose self-insurance include:
- The employer is able to customize their plan design to meet the specific health care needs of its employees as opposed to purchasing a one-size-fits-all plan.
- The employer maintains control over the health plan reserves, enabling maximization of interest income.
- The employer does not have to pre-pay for coverage, thereby providing for improved cash flow.
- The employer is not subject to conflicting state health insurance regulations/benefit mandates, as self-insured health plans are regulated under federal law (ERISA).
- The employer is not subject to state health insurance premium taxes.
- The employer is free to contract with the providers or provider network best suited to meet the health care needs of its employees.
Self-Insurance is NOT the best option for everyone, even with the advantages listed above, there are also disadvantages. Stay tuned for next week’s blog post where we will discuss the disadvantages related to a self-funded health plan.
Don’t just take our word for it, hear it from an expert!
Join HAWK Advisers on June 11, 2019 at the Hampton Inn in Downtown Roanoke where David Smith, Vice President of Risk Management & Compliance with EbenConcepts will take an in-depth exploration of Self-Funding.