What Is Self-Insured Health Insurance?
Self-insured health insurance is a method of providing healthcare coverage where an employer assumes the financial risk of offering healthcare benefits to its employees. Instead of making fixed premium payments to an insurance company, the employer directly bears the costs of its employees' healthcare claims. This approach grants employers greater flexibility in crafting health plans that cater to the specific requirements of their workforce. This adaptability enables employers to potentially lower expenses by solely covering the healthcare services utilized by their employees.
Who Needs Self-Insurance?
No one needs self-insurance, per se. Many businesses, large and small, are content to provide employees with a traditional health insurance plan. However, self-insurance may be an option worth considering – particularly for companies with substantial assets and a low claims rate for employee benefits like health care.
A self-insured employer is responsible for paying for their employees' health care claims themselves — meaning they must have enough money to cover these financial obligations. Therefore, a business without reliable or sufficient income, such as a relatively new or small business, might want to rethink this route.
Ultimately, the decision comes down to what makes the most financial sense. Talk to your financial advisor for more information.
Why should you consider Self-Insurance ?
There are many advantages that come with self-insurance, which explains why this alternate strategy has become so popular.
Cost savings: One of the key advantages of self-insurance is the cost savings it can provide. By setting aside funds to cover potential losses, organizations can significantly reduce their insurance costs. With self-insurance, there are no premiums, commissions, or fees commonly associated with the commercial insurance market. This can result in significant savings over time.
Tailored coverage options: Another advantage of self-insurance is the flexibility it can provide. With self-insurance, organizations can tailor their insurance coverage to meet their specific needs. This allows for more control over the claims process and coverage features. This flexibility can be particularly beneficial for organizations with unique risk profiles or specific insurance needs that are not addressed by traditional insurance providers. By creating a customized self-insurance plan, organizations can ensure that they are protected in the areas where they need it most, and specific to their needs.
Increased cash flow: Self-insurance can also provide cash flow advantages. With traditional insurance policies, premiums must be paid to the insurer on a regular basis, regardless of if a claim is made. In contrast, a self-insured entity will set aside funds to cover potential losses as needed. Funds are only used when necessary, potentially providing improved cash flow for an organization. Also, by setting aside funds for potential losses, organizations can earn interest on those funds, further improving cash flow.
To find the best self-insurance coverage plan for your organization, contact us now!
