Small Business Health Insurance
How Does Self-Funding Insurance Work?
When an employer chooses to provide employees with healthcare benefits through self-funding, he or she will typically set up a special trust fund designed to earmark money to later pay incurred claims. Employers rely on third party administrations (TPAs) to process claims on their behalf. TPAs may also provide additional services, such as collecting premiums, providing utilization review of claims, contracting for PPO services, and providing overall service for the chosen employee benefit plan. Healthcare claims can either be subcontracted to a TPA or can be completed in-house.
If you are considering becoming a self-funded employer, you may be worried about the occurrence of catastrophic claims. Fortunately, employers can protect against unpredicted claims and avoid financial distress. While larger employers typically have enough financial reserves on hand to cover nearly any healthcare costs, some smaller businesses may not have a large reserve. To cover catastrophic claims, these businesses rely on stop-loss insurance. With stop-loss insurance, employers are reimbursed for any claims that fall above a specific dollar amount. This can be highly beneficial for employers who want to switch to self-funding insurance but do not yet have the funds to cover exorbitant healthcare costs.
How Does It Differ from Traditional Insurance?
Choosing the right type of health plan is a crucial part of the growth and long-term success of your business. However, many employers are confused about the differences between self-funded and traditional insurance. With self funding insurance, a company is responsible for paying for its own medical bills directly and a TPA performs tasks such as processing claims and issuing ID cards. When a company chooses to go with traditional or fully-insured insurance, the company pays a premium to an insurance carrier. The premium is usually fixed for the year and is based on the number of enrolled employees. In this case, the insurance company assumes the risk.
SCHEDULE A MEETING
Health insurance can be complicated and you want to work with someone whom you can trust. As an independent agent working with multiple providers, June is able to make sure you get the right coverage you need at the right price.
Schedual a one on one meeting with June today!