Saving Money, Simplifying Administration with an Alternate Funding Plan
The main concern for most small employers is providing health coverage to their employees. Alternate funding plans offer an option to help save money for the employer and help employees get more out of their plan.
With traditional plans, a small business pays a fixed premium to the insurance company, and then the insurance company pays the health care claims as well as the administrative costs, sales commissions, and taxes.
If the actual health care claims are higher than expected, the insurance company covers it. But if the claims are lower than expected, the insurance company keeps the difference. This means the small business doesn’t get anything back if employees have lower-than-expected claims.
With an Alternate Funding or self-funded plan, if the actual health care claims are lower than expected, the plan shares in the savings with some money back at the end of the year. And if the claims are higher than expected, stop-loss insurance covers it.
Stop-loss insurance puts a cap on the plan’s medical claims payment risk. This cap is based on the amount the plan must pay for an individual’s medical claims, as well as the combined amount of all eligible medical claims the plan must pay in a given period. With stop-loss insurance, the plan is protected from high individual medical claims and high overall claims expenses.
Designed with employees and the small business owner in mind—because everyone needs to balance budgets
Employees often don’t meet their deductible and feel they don’t get the full benefit from their health coverage and end up paying most expenses out of their own pocket. About 60% of employees spend less than $1,500 in a year on healthcare expenses from office copays for routine care and prescriptions. Alternate Funding plans offer a different option.
Employees have different health care needs, so it’s important for them to have a choice in what copayment and deductible option that best fits their needs. They can decide if they want a lower copayments, a lower deductible, or a lower pharmacy deductible? Employees will have the choice to select the basic plan or make a decision to go with another plan option.
With an Alternate Funding Plan, monthly premium payments for the small business aren’t affected by employee choice. The plan is a “level-funded” plan, so the company makes the same monthly payment throughout the plan year. And the small business won’t have to pay any more at the end of the plan year, even if there are high claims costs.
Additional benefits of an Alternate Funding plan include saving on lower premium taxes and state mandates do not apply. Employers also have a change to get some premium back at the end of the year.
An Alternate Funding Plan is a win-win for the small business and the employee - the small business gains payment stability and the employee gains more options to find a health plan that best fits their family needs. Contact Us today to learn more about this opportunity.