Another way that larger employers can cut health insurance costs is by establishing a self-insured plan.
With a traditional health insurance plan, a company pays monthly premiums to the insurance carrier and the carrier pays for treatment costs and medical claims. If the claim costs exceed the premium amounts collected from the employer, the carrier pays the difference.
More and more employers are reducing their health insurance costs by turning to self-insured plans. Under a self-insured arrangement, the employer incurs the expenses for treatment costs and medical claims. The employer pays a specific amount to the insurance carrier to act as the claims administrator, process the employees’ claims and manage the benefit plans.
By not asking someone else to assume the health insurance risk, a self-insured plan typically lowers the overall program costs.
Self-insured plans typically work best for larger organizations, because the larger employee population enables the employer and insurance carrier to more accurately predict the expected claim costs. A large organization can also make the most use of the cash flow advantages created through self insurance.
To self insure, employers should find a health insurance carrier that can provide administrative support to a wide variety of health care plans and innovations, including health savings accounts, health reimbursement accounts, out-of-network options, preventive care and wellness programs. The carrier should also be able to provide fast and accurate claims processing, courteous service, periodic claim activity reviews and coordination of benefits when a spouse or significant other has other health insurance coverage.