By guest author: Tara Thompson – Tara is a contributing writer for Markitors, a Digital Marketing Company. In her free time, she enjoys reading as well as crocheting.
If you are a self-insured company, that means you don’t pay an insurance company to cover medical, dental, and vision claims for your employees. Instead, you take on that financial risk yourself. Some self-insured companies also use a third-party administrator to process the claims.
Thanks to this process, self-insured companies often improve operating profits. This improvement comes from the fact that the number of claims is often reduced. Additionally, they have the freedom to tailor plans based on employee health.
Even though there are many advantages to being a self-insured company, there is also the necessary upkeep in order to continue being successful. To help you maintain that success as a self-insured company, here is a list of the top 5 strategies to consider.
1. Stay Current
One of the most important things a business can do is to stay up-to-date with the ever-changing market surrounding them. This is especially true if you are a self-insured company. Instead of buying an insurance plan through a provider, making that plan falls to your shoulders.
Often, self-insured companies use a consultant regarding benefits so that the details of these plans are correct. Essentially, you are in charge of the administrative details of your employees insurance. This is why staying up to date is important. Otherwise, you may have false expectations regarding overall cost, for example.
To avoid falling behind, your company’s plan needs a clear organizational design. Overall, you should be able to problem-solve, plan, and generally be ready for unexpected circumstances that could crop up. If you aren’t flexible enough to adjust your plan for potential changes that could occur, then your business may struggle.
Doing all of this on your own can be quite difficult. This is where organization design firms can be beneficial to your company and its progress. Consultants from these firms partner with your business to modernize your organization structure. In doing so, you are better prepared to execute your company strategy without any unnecessary roadblocks in your way.
2. Develop a Clear Plan
To implement any new policy in a company, you need a clear and direct plan in place. This is especially true for self-insurance endeavors. For example, you’re going to need a budget set aside for the insurance plan you provide to your employees.
Typically, it’s cheaper to self-insure than to pay an insurance provider for various plans you can give to your employees. However, to successfully be a self-insured company, you must determine how much you can spend on each individual employee’s health plan. You may want to consult a broker, who can help design insurance plans for your employees.
A more streamlined HR department helps you in the long run by making it easier to sustain your self-insured status. Without the help of your HR department, you can easily get overwhelmed when dealing with claims, for example. With a budgeted HR department, not only can you delegate these tasks but you can also save money while you’re at it.
3. Establish a Trust Fund
You have to find a way to fund the claims you receive. Therefore, employers should establish a trust fund that allows them to pay those claims. It takes careful planning for what is expected from total costs for insurance claims. This is why bookkeeping is important when it comes to how these funds are used. This goes into planning reserve funds as well as understanding the need for things like stop-loss insurance. Without bookkeeping, you won’t know what it is you’re paying for when it comes to claims.
Another important aspect is collecting your funding in the first place. It depends on where your business is located, but typically, it will be subject to the provisions of the federal Employee Retirement Income Security Act of 1974. Thanks to this, most trusts don’t need to comply with state insurance laws. However, there are some circumstances that require them to do so. This is why research is key with self-insurance trusts.
When doing so, one of the best ways to gather your funds for your self-insurance trust is to get both corporate and employee contributions. This will mean that a portion of the trust fund will be funded by the corporate entity providing the plan, while another portion is funded by employees. This is just like having a portion of your wages go towards payments for an insurance provider. There are, however, some key differences when it comes to flexibility.
For example, in 2018, the average percentage that employees paid annually for company-provided health insurance was around 18%. When going with the self-insured option, employers have more flexibility when it comes to what they will contribute and what an employee must contribute.
4. Partner With a Third-Party Administrator
Many aspects of being a self-insured company require expertise that Third-Party Administrators (TPA) can provide efficiently. There are a few factors that go into what TPAs can offer your self-insured company. A TPA’s role includes processing medical claims, healthcare customer service, as well as administering the self-insurance plan.
These groups are very helpful to any self-insured business. Trying to achieve all of these goals on your own is very time-consuming. Additionally, you want to make sure all aspects of your insurance are executed efficiently. With the help of a TPA, you can ensure that your insurance is being implemented by specialists who understand the complexities of this process.
All in all, if you are planning to implement self-insurance in your company, it’s a good idea to find a TPA to help. Make sure they understand your business goals as well as what you want your insurance plan to look like. This will help prioritize where the TPA’s focus needs to be the most.
5. Get Stop-Loss Insurance to Protect
One of the most important parts of planning your budget for a self-insured company is knowing what your budget limit is. While you can try to provide as much coverage for your employees, there is only so much you can afford. This is why getting stop-loss insurance can be helpful for your budget, not to mention your peace of mind.
Stop-loss insurance is coverage that provides reimbursement to self-insured employers for claims that are extremely high and exceed the predetermined claim limits. Stop-loss insurance is a type of coverage that is only for the insurer. This way, if some huge cost comes up unexpectedly, you aren’t in danger of going over your budget.
Essentially, stop-loss insurance is insuring your insurance. While you can plan for any number of possibilities, there are always going to be unexpected costs that will come up. This is where stop-loss insurance becomes very important.
There are a plethora of options to choose from when it comes to stop-loss insurance and their carriers. Make sure that you have a general idea of what costs may look like before researching stop-loss insurance. This way you can make the best decision for your company and your budget.
Are You a Sufficient Self-Insured Company?
These above tips are only some of the ways you can make sure your self-insured company is running well. Every company and its employees are unique. So, when you begin to plan your process for becoming a self-insured company, there are a lot of factors that matter.
This is why planning your insurance is too overwhelming to do on your own. Consider reaching out to experts to see if your progress fits the plan you wish to achieve. There’s a reason why more companies are becoming self-insured in today’s workforce. The process for taking care of your employees the right way doesn’t always need to be hard to obtain.