When does it make sense for an employer to go self-insured?
It makes sense to start investigating a Self-Insured plan when a business reaches that 40 to 50-employee size. It doesn’t mean it’s the best model for every group. It means that, with that many employees, an employer should undoubtedly look into it. A good insurance advisor will help a business look at their population, understand their claims, and understand the risk. And by risk, we mean what deductible the organization will want to absorb.
Risk Vs. Reward
An insurance advisor must help businesses determine the risk versus the reward. Once that’s determined, the discussion moves to the transfer of risk. And then it’s a matter of math. Look at the expense. Look at the group’s trends. The more employees you add, the better the spread of risk. A self-funded plan can be more profitable by adding MORE employees. Why? Because you can control that cost and that spread of risk.
Statistically, 85% of businesses in the United States have 50 employees or less. That’s a multi-billion dollar industry for the healthcare insurance industry. And they know that. So as an agency, we need to help employers take back that control and start looking at plan model options early on.
That again comes with having the right insurance advisor that can help. Look behind the curtain and ask what’s making up that dollar cost. Based on the behaviors of your organization, how can you control your health benefits spending? If not, the carrier has all the control.
Healthcare Coverage Spending
Recently, I got a call from a prospect (now a client), and they got a 39% increase on their group health renewal. This HR manager had no reason the rate went up other than what “must have been paid in claims.” The company paid for it! They paid the renewal! So I asked, “Did you see a 40% increase in your profits this last year?” The answer was no, and that pointed to another problem: healthcare spending is outpacing a company’s ability to make profits.
With inflation on top of that for employees, people need help to afford their healthcare coverage. The leading cause of bankruptcy in this country is healthcare-related lending. And most of it can be fixable.
Is a self-funded healthcare insurance plan right for your business? Contact Cogent Advisors to learn more.
