
Understanding Self-Funded Healthcare

Healthcare costs are rising, becoming a major concern for employers and employees. A recent survey shows 63% of employees consider healthcare the most important part of their benefits package. However, traditional healthcare models can be expensive and difficult to navigate.
This is where self-funded healthcare comes in. Self-funded healthcare is becoming increasingly popular among employers and employees, but what exactly is it? This guide will examine self-funded healthcare and how it can benefit both employers and employees.

Wellness Magazine/ Pinterest | 80% of covered workers in larger companies (over 5000 employees) were enrolled in a self-funded health plan in 2020
What Is Self-Funded Healthcare?
Self-funded healthcare, also referred to as self-insured health plans, is a type of healthcare coverage where the employer assumes the financial risk for providing healthcare benefits to its employees.
This means that instead of paying premiums to an insurance company to cover their employees’ healthcare expenses, the employer pays for these expenses directly. Self-funding allows employers to take more control of their healthcare plan and customize it to their specific needs.
How Does It Work?
Self-funded healthcare allows employers to set aside a certain amount for their employees’ healthcare expenses. This money is placed in a fund managed by the employer or a third-party administrator. The fund pays for all medical expenses, including doctor visits, hospitalizations, and prescriptions. Any money left over in the fund at the end of the year can be used to offset future expenses or returned to the employer.

Wellness Magazine/ Pinterest | Self-funding allows cash flow to work to your advantage
Benefits
Self-funded healthcare also has many benefits for employees. One of the biggest benefits is that employees can access a wider network of healthcare providers since self-funded plans are not limited to a specific network. Employees also have more control over their healthcare since the employer can customize the plan to meet their specific needs. This can lead to higher employee satisfaction and better health outcomes.
Risks
While self-funded healthcare has many benefits, there are also some risks involved. One of the biggest risks is that if the employer underestimates their healthcare costs and runs out of money in their fund, they will be responsible for covering the remaining costs.
This is why employers must consider costs and manage funds effectively and carefully. Another risk is that self-funded healthcare is subject to certain regulations varying from state to state.

Wellness Magazine/ Pinterest | One of the main disadvantages of self-funded plans is that they expose the employer to more financial risk and volatility
Bottom Line
Self-funded healthcare is a viable option for employers and employees seeking a more cost-effective and customizable healthcare plan. It offers many benefits, including cost savings, more control over the healthcare plan, and access to a wider network of healthcare providers.
However, it also comes with risks that must be carefully considered and managed. Employers and employees should consult with an experienced healthcare consultant to determine if self-funded healthcare is the right choice for their organization.
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