Partially Self-Funded Medical Plans are Like a Great Chili
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Chili is one of my favorite dishes. I make it at least once every two weeks. My nine-year-old daughter actually requested it for her birthday dinner. There’s just something about it. It has the right blend of flavors, both spicy and sweet (depending on your recipe). It’s great for cold weather (although I often make it year round) and it can be low carb if you make it without beans. One thing’s for certain, there are many varying ingredients that go into the best chili.
I’ve found that self-funding medical plans are very similar to a good chili. Like ingredients, there are several different indicators that should be examined to ensure the greatest financial result.
If you can control these indicators, you’ll minimize the frequency and severity of your medical claims. When this happens, self-funding is always better. Always.
First, it’s important to understand the issue all fully insured medical plans face. An insurance carrier’s premium will always float up to and stay at the high water mark. Think about it, when was the last time a carrier gave you a 15% decrease? Never. While fully insured, the only time you’ll experience a savings like that is if you change carriers and your new one offers a deep new business discount. However, they will recover those discounts over subsequent renewals. So, you’ll end up paying that money back; it’s just a matter of when. Sure you could change carriers every year, but the impact on your organization and your employees will not be favorable, I assure you.
When your medical plan is self-funded, you only pay the claims that actually materialize, and if you have a good claim year, you keep the money and it won’t be recovered in the following plan year.
When I describe this scenario to my clients, they always ask the same question: How do we know when it’s safe for us to self-fund our medical plan?
Unfortunately, the answer goes beyond demographic and enrollment numbers.
Just like the best chili is more than just beef and beans, self-funded medical plans are made up of many ingredients. It takes the right blend of size, demographics, loss ratio, large claims, consumer driven plans and biometric screening scores mixing together to create the best financial result.
Find out if the self-funded path is right for your company in our Self-Funded Readiness webinar replay.
- How do You Like Your Benefits - Self-funded or Insured?
- Is Self-funding the Solution to Your Healthcare and ACA Woes?
- Self-Funding Scare You?
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