Essay on Self-Funded Health Plans

Self-funded health insurance plans are a common practice in the health sector. An organization must weigh the cost of insuring its employees fully or allowing them to have self-funded plans. As such, a feasibility study for self-funded health insurance plans is necessary. Fully sponsored health plans represent a traditional way that organizations use to lower the cost of insurance. Self-funded health plans are preferable by most employees as such plans allow them to save on the interest that otherwise could have been claimed by the insuring company. It is only vital that an organization considers the merits and demerits of self-funded plans before deciding on what to choose. They include costs, risks associated, and basic changes in organizational policy. It is also critical to note that self-funded plans are the best deal for employees within an organization (Sommers, Gawande & Baicker, 2017).

The first pro associated with self-funded health plans is lower costs for the employer in the long run. Insurance cost can get high sometimes, and it is the role of the company to ensure that such costs do not increase. For instance, costs such as employer benefit profit that the company incurs are not part of the self-funded plan. Moreover, such plans enable the employer to get a deeper understanding and control of their health insurance spends (Rejda, 2015).

Second, employers under the self-funded health insurance plan have more control over the benefits that accrue. Cash flows in such cases increase for the company as there is less spending associated. The money paid can be saved, and the company will enjoy interest that the savings accrue before they are needed. Third, self-funded insurance health programs have flexibility in their coverage, allowing the company to adjust and bargain for lower costs. Additionally, self-funded plans have more effective incentive programs for employers (Dafny, Gruber & Ody, 2015).

Self-funded health plans have disadvantages associated with them. First, there is a lack of protection, especially when the claims are high than anticipated. Stop-loss might act as a protection, but such costs can jump to an expensive bill, which might prove hefty for the employers. As such, a company remains with a risk of paying the premiums that employees have failed to honor. When the company advocates for fully-funded health plans, it guarantees smooth operation as no premiums will be skipped, reducing any chance of hefty bills as fines.

Second, administrative costs that are associated with such plans are high. Such policies are demanding from the employer as they should do the work that otherwise could have been done by the insurer. Costs associated include those incurred when implementing and maintaining such plans. As such, the self-funded plans can raise the administrative costs of the employer, making other employers to have a different thought. Equally, savings are not immediate and may take time to develop under self-funded health plans.

To sum it up, self-funded health plans are economical and easy to handle for employers. The employer can save on costs and reduce risks associated with fully-funded insurance plans. Such programs are disadvantageous to companies as they affect their administrative operations. This is because many employers will have to monitor its implementation and development. The health plans are also associated with the risk of making the company pay a hefty bill in case employees default premium payments. It is certain to assert that self-funded health plans are the best option that a company should take.

References

Dafny, L., Gruber, J., & Ody, C. (2015). More insurers lower premiums: Evidence from initial pricing in the health insurance marketplaces. American Journal of Health Economics, 1(1), 53-81.

Rejda, G. E. (2015). Social insurance and economic security. Routledge.

Sommers, B. D., Gawande, A. A., & Baicker, K. (2017). Health insurance coverage and health—what the recent evidence tells us.