As you may have heard, self-funded healthcare plans can be a very effective way to mitigate the escalating cost of healthcare in the United States. This is especially the case for large firms with 1,000 or more employees – firms that would otherwise be forced to reduce plan options in the new healthcare frontier we now find ourselves in.
So, how much money can a self-funded healthcare plan save a large employer? According to a Kaiser Permanente study, it may be able to save them up to $700 per employee every year. Yes, per employee! If the company indeed has 1,000 employees, that’s a savings of $700,000 a year. Even for a large, profitable corporation, that’s not pocket change!
As for mid-size firms that cover anywhere from 100 to 1,000 employees, they have been slightly less enthusiastic about choosing self-funded healthcare plans. As it turns out, only 58 percent have chosen to self-fund company healthcare, while 93 percent of companies with 5,000 or more employees choose to self-fund. Why the hesitation? It may be because the cost of administering a self-funded plan, combined with the premium payments necessary to cap their risk with stop loss coverage, is just too big a hill to climb. It may seem too costly, too complicated and just out of the company’s “league,” so to speak – and that’s fine. Self-funded healthcare plans are great, but they aren’t right for every employer.
One option these mid-sized companies may consider is a captive stop loss agreement, which requires them to pool their risk with other insurers in order to attain the critical mass and stability they need to keep benefits secure. This “group purchasing power” adds a much-needed level of protection against catastrophic losses, so it can be ideal for mid-sized businesses.
If you have questions about self-funded healthcare plans or captive stop loss agreements, contact GM&A to request a corporate healthcare consultation. We will be glad to see if we can help.