Pulling back the curtain to reveal what’s really going on behind the scenes can be an eye-opening experience. Often, a mysterious process purposely hidden, turns out to be quite different than what was originally perceived. When the truth is exposed, the seemingly complex becomes clear. The same can be said about the way you fund your healthcare plan.
There are many perceived differences between traditional health insurance and a partially self-funded health insurance model. However, there is little difference when it comes to the way you fund the plan and the actual coverage you receive.
With traditional healthcare insurance, employers pay fixed monthly premiums to an insurer. These premiums are set for the year and paid no matter what the reality of employees’ health situation is at a given point in time. At the end of the plan year, if there are funds left over due to lower-than-expected claims, those funds are retained by the insurer. To ensure enough funds are collected in premium to cover the claims for a given group of people, insurers can collect up to 20% more than actuarially expected. This excess margin is a significant amount of money that employers are leaving on the table at the end of each year in those years when claims run better than expected.
With partially self-funded health insurance employers pay for member claims up to a pre-determined stop loss threshold allowing the employer to pocket the excess margin (up to 20%) which would usually be retained by the insurer. National network access is provided so employees can visit the same healthcare providers as a traditional plan and stop-loss insurance places a monetary limit on the amount of claims the employer would be responsible for paying for a given year. Traditional Plans are essentially partially self-funded plans hidden behind a curtain.
Additionally, the employer gets more transparency about their costs with a partially self-funded plan because they receive monthly reporting with actionable data to provide insight into every part of their plan. With traditional plans, the insurance carrier negotiates with healthcare providers “behind the curtain” to get prices for their services. With self-funding there is no process like that because the middleman (the carrier) is removed.
EVHC is a leader in partially self-funded health insurance options and can help you and your clients explore the potential benefits of switching to The Last Healthcare Plan You’ll Ever Need.
