GroupBenefits.Com Helps Small Businesses Stop Overpaying for Health Insurance With Self-Funded and Level-Funded Plans
Small business owners are all too familiar with the frustration of watching their health insurance premiums increase year after year, particularly when their employees are generally healthy. What’s even more frustrating is knowing that their company is likely subsidizing the high claims of other, less healthy groups under a fully insured plan.
In the traditional fully insured model, the healthier 80% of businesses end up shouldering the healthcare costs for the 20% that generate the majority of claims. Essentially, businesses are paying inflated premiums to an insurance carrier that pools their money with others’ and pockets the profit.
But there’s a shift happening. More and more small businesses are taking control of their healthcare costs by transitioning to self-funded and level-funded health plans, which allow employers to stop overpaying and regain control of their healthcare dollars.
The Gas Station Analogy: Overpaying for Other People’s Fuel
Imagine a neighborhood where 10 residents share a single gas station. Every month, each person contributes $500 to a shared fuel fund. Most of the residents drive fuel-efficient vehicles, but a couple of neighbors have large trucks that are constantly on the road, consuming more fuel.
As a result, the fuel-efficient drivers end up paying more than their fair share, while the truck drivers benefit disproportionately. This is similar to how fully insured health plans work. In a group health plan, businesses with healthy employees often end up subsidizing the claims of other companies with less healthy groups. If your business isn’t generating high claims, why continue paying like it is?
The Solution: Self-Funded and Level-Funded Plans
Self-funded and level-funded health plans are the smarter alternatives that break this cycle of overpaying. Instead of sending large, fixed premiums to an insurance carrier, businesses with self-funded or level-funded plans pay for their employees’ actual health claims, administrative costs, and stop-loss insurance to protect against unexpected high claims.
Here’s how these plans work:
- Self-Funded Plans: With self-funded plans, businesses directly fund their employees’ claims. The business keeps what they don’t spend, and stop-loss insurance protects them from catastrophic claims.
- Level-Funded Plans: Level-funded plans offer a hybrid model of both self-funded and fully insured plans. Employers pay a fixed monthly rate, similar to a traditional premium, but if claims are lower than expected, they get money back at the end of the year. If claims are higher, stop-loss insurance steps in.
Both models allow businesses to regain control over their healthcare spending, break the cycle of overpaying, and tailor their healthcare program to their specific needs.
Why It’s Gaining Popularity Among Small Businesses
Small and mid-sized businesses are increasingly adopting self-funded and level-funded plans due to the substantial benefits they provide:
- Cost Savings: Many businesses save 20–30% or more compared to traditional fully insured plans. By cutting out the high profit margins built into insurance premiums, businesses keep more of their healthcare dollars.
- Transparency: Businesses gain access to real claims data, empowering them to make smarter, more informed decisions about their healthcare offerings.
- Reduced Carrier Profits: By choosing self-funded or level-funded plans, businesses avoid the inflated premiums that include significant carrier profits, passing those savings back to the employer.
The insurance industry doesn’t want small businesses to know that these alternatives are available. Their profit models rely on the predictable flow of overpaid premiums from businesses with relatively healthy employees.
Is Your Business a Good Candidate for Self-Funding or Level-Funding?
If your business has generally healthy employees, you may be an ideal candidate for self-funded or level-funded plans. Even if your business has had a few claims, level-funded plans provide a safety buffer through stop-loss insurance. This gives businesses the ability to take control of their healthcare spending, while still protecting against unexpected costs.
Self-funded and level-funded plans aren’t just for large corporations; they are increasingly the future of small group health insurance. If your business is healthy and responsible with healthcare costs, it’s time to stop blindly paying into a system that doesn’t work for you.
Final Thoughts: Take Control of Your Healthcare Costs
Fully insured plans may seem like a safe option, but the truth is that they often come at an unjustified cost. Why continue to pay inflated premiums to fund other businesses’ healthcare claims when your company is healthy and responsible with its own spending?
By switching to self-funded or level-funded health plans, small businesses can regain control, reduce long-term healthcare costs, and still offer their employees the same or better coverage.
GroupBenefits.com is helping small businesses break away from the traditional fully insured model and create more cost-effective, sustainable benefits programs. With self-funded and level-funded plans, businesses can take charge of their healthcare expenses, stop overpaying, and ensure the long-term success of their benefits program.
For more information on how GroupBenefits.com can help your business lower healthcare costs with self-funded and level-funded health plans, contact [email protected] or visit www.GroupBenefits.com.
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