Next to payroll, health insurance is often the largest expense an employer will incur. And, as health insurance premiums rise, business owners are looking for ways to provide quality healthcare to their employees, while saving money. In many cases, the solution is a self-funded medical plan. With health insurance premiums expected to increase by 55% over the next three years, many employers are abandoning traditional group health insurance and adopting alternative programs, such as self-funded medical plans.
RMC recently helped a business save money by implementing a self-funded medical plan. The company has two locations. It adopted a self-funded medical plan to cover the approximately 90 employees at one location. It maintained its fully-insured plan to cover the approximately 100 employees at the other location. For the year prior to the adoption of the self-funded medical plan, the employer paid $506,000 in health insurance premiums for the 90 employees now covered by the self-funded plan. In the first year of the self-funded medical plan, we were able to reduce the employer’s cost for these employees to $282,000, a savings of $224,000. The employer was so pleased with the results of the self-funded medical plan that it has decided to cover all of its employees in the self-funded medical plan.
How does a self-funded medical plan actually save money? In a self-funded medical plan, the employer pays medical costs out of general assets, instead of paying health insurance premiums. In many cases, the medical claims paid by the employer will be less than the insurance premiums that the employer would otherwise have paid. That is how a self-funded medical generates savings for the employer. Furthermore, to protect the employer in the event that claims are higher than expected, RMC will help the employer purchase stop-loss insurance to cover catastrophic claims.
What are the advantages of a self-funded medical plan?
- Flexible plan design
- Improved cash flow
- State premium tax only on stop-loss premium
- No Affordable Care Act (ACA) insurer tax
- Employer, not the insurance company, benefits if claims experience is better than expected
- Reinvest savings in business
- Control the benefits offered by its medical plan
- Protect against rising health insurance premiums
- Participate in prescription saving plans
- Participate in wellness programs
- Use telehealth services
- Enable its employees to access plan information through mobile apps
To learn more about the benefits of a self-funded medical plan or to receive a free quote, contact RMC today at 239-298-8210 or rmc@rmcgp.com.
