A Look at Self-Funded Health Care

Self-funded health care is a type of health insurance plan that is provided by certain employers. With this type of health coverage, the employer covers the cost of medical expenses instead of contracting with a traditional medical insurance provider. Here are the basics of self-funded healthcare and how it works.

Self-Funded Health Care

This type of health care is provided by certain business owners that wish to avoid buying traditional health insurance. With self funded health care, a business is going to put a certain amount of money into an account every month. This money will begin accumulating and it will go towards the medical expenses of employees of the company. In addition to this, the employer purchases stoploss insurance that is designed to cover claims that are excessive. The basic idea behind this type of insurance is that the employer will cover the costs of small medical procedures out of his or her own pocket and allow the stoploss insurance to cover big claims such as a large surgery.

Benefits

Using this type of health insurance can be beneficial in a few different ways. First of all, it can save the business a substantial amount of money in some cases. Some estimates say that a business could save as much as 25 percent by using this method. In order to save money, the workforce have to be relatively healthy. Therefore, if your business has a majority of older workers, this may not work out as well. When you utilize this type of insurance, you are not going to pay any health insurance premiums. You will have to pay something for the stoploss insurance, but it is going to be very affordable compared to regular health insurance.

Another benefit of this type of health insurance is that the employer gets to decide what type of services are going to be covered. The employer does not have to rely on an insurance company to tell them what is going to be covered and what is not. For example, the employer will get to choose whether employees get preventive care such as mammograms or checkups. Not having to answer to someone else in regard to healthcare can be a big benefit for many business owners.

Drawbacks

Even though this type of insurance can be beneficial, there are a few drawbacks to consider as well. For example, if your workforce is not that healthy, you could potentially end up spending quite a bit more than you would with a regular insurance plan. If several customers had to have a lot of medical care over the long-term, you might end up paying quite a bit of money for these bills.

Another drawback of this type of plan is that it requires discipline. It would be very easy for a struggling business owner to get into the funds from this type of account in order to avoid going out of business. Then when medical costs are incurred by employees, the money might not be available. 

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