Medical/Healthcare Insurance

Guide

What are Employee Benefit Plan Funding Options?

A key part of being an employer is putting in place a structure that enables you to offer and maintain an employee benefit plan. You can choose to do this independently, or together with your employees. There are several options for employee benefits programs that employers can choose from including: –

The Fully Insured Health Plan

This is the most straightforward as all that it needs is for a fixed premium to be paid each month, and when someone makes a claim, the insurance carrier pays. This is an ideal option if one prefers predictability and wants the carrier to assume fiduciary claim liability. The challenges with this option are that if there are any profits, the carrier gets to keep them all, and premium taxes need to be paid on entire premium. Having a flexible plan with this option is close to impossible.

The High Deductible Partially Self-Funded Plan

With this option, the employer will pay a fixed monthly premium from a plan that is highly deductible. If the claims made are above the deductible that the insurance carrier provides, you will pay the balance. The main reason this may be an option is that any unused HRA expense can be claimed. The disadvantage that comes up with this option is higher fixed costs from the carrier, and they also get to keep all the profits.

These two options stand out as the primary funding options that employers have made use of. However, the changing business landscape, and the elevated power from small and medium enterprises has opened up alternative funding solutions that fit a range of budgets. Some of these include: –

Captive Plans

With a captive agreement, several employers join forces and go into an agreement that shares the risk. There is an administrator in place that controls the captive and mitigates the risk for the employers. With this agreement, the employers may choose to cover a certain amount towards the claims that individuals make. They may also choose to have a stop-loss coverage limit for better control of the costs. This type of employee benefit option is ideal for small businesses.

Private Exchange Plans

Another one of the alternative funding options for employee benefits is the private exchange. Here the employers will choose health plans and services, so that the employees are able to choose which option that they prefer. Then the employer will ensure that funds are available for their staff to purchase that benefit. Employees can then elevate their provided option by topping up funds to get more services. For employers, education to employees is required so that they can make smart decisions.

When choosing an employee benefits package, the most essential factor for consideration is your budget. By understanding how much you have to spend, you can decide whether to go for a benefit plan that has fixed costs or one with some more flexibility. Flexible options give you the chance to get some returns, but you take on the risk of incurring higher costs without complaint.

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