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Fully Insured and Self-Funded Plans: The Pros and Cons

In our blog published a couple of weeks ago, we delved into the three different types of group health insurance plans: fully insured, level-funded, and self-funded. As you’re researching the best kind of group health insurance plan for your business, let’s focus on the two opposite ends of the spectrum and see how they compare: fully insured group health plans and self-funded group health plans.

Defining the plans

Fully insured

As a reminder, a fully insured plan is what people typically think of when they think of employer-provided health insurance. Employers purchase the plan from an insurance company (carrier) and pay a premium to the insurance company. When employees make a claim, the insurance company writes a check to the healthcare provider. Employees pay all the deductibles and co-pays.

Self-funded

In a self-funded plan, the insurance company provides all the administrative services, with a fixed cost for administrative fees. Self-funded plans are fully funded by the employer, who pays for employee claims from a bank account or trust fund set up for that purpose.

The pros and cons of fully insured health plans

Pros

Employers looking to keep their costs consistent will have fewer cost/rate variances month to month because of fixed premium costs.

All claims are managed by the insurance provider, which keeps the employer’s involvement in the day-to-day management at a minimum (and this also makes fully insured plans faster to implement). Employers also benefit from the insurance company taking on all the costs associated with employee medical claims. Employers and employees alike can feel confident knowing their premiums during the plan period will not change even if there are many claims in any one year.

Cons

While costs are consistent from month to month, employers must either accept the community rate if they’re a small group and or negotiate their rate with insurers each year if they’re a large group. Rates are determined with the following criteria in an underwriting process:

  • Company size
  • Employees’ health conditions
  • Claims experience (number of claims filed by employees last year)
  • Loss ratio (claims cost divided by the premiums collected)

These criteria can determine whether the following year’s premiums are higher or lower. Premium taxes are also higher with fully insured plans. And if you are looking for a plan with benefit design flexibility, fully insured plans often aren’t customizable to the degree an employer would prefer.

The pros and cons of self-funded plans

Pros

If the idea of assuming all financial risk sounds…well, risky, purchasing stop-loss coverage helps with those risks. You will also get additional savings if you have a low number of claims in any given year. Self-funded plans offer the greatest amount of flexibility and oversight, as you manage employee claims and can select which benefits you offer in your plan.

Cons

Not having the insurance company take all the risk when it comes to paying claims may leave you feeling uncertain about claims costs. Also, if your business does not have a stable cash flow, cost fluctuations due to employee claims can be stressful. Especially if you choose not to have stop-loss coverage, which can leave you potentially paying a great amount of money when it comes to employee medical claims.

While a self-funded plan is more hands-on, there are specific and additional compliance requirements such as non-discrimination requirements and 5500 tax filings. Also, as self-funded plans require a more hands-on approach, employers without the time or resources may find them difficult to manage.

Look at all sides

Fully insured and self-funded plans are two different sides of the coin. Be sure and take the time to talk to a trusted advisor to help you fully iron out the differences and take the next best step for you, your business, and your employees.

 

 

Content provided by Q4iNetwork and partners

Photo by stanciuc

3 Ways to Set Yourself Up For Open Enrollment Success

Regardless of when your benefits package renews, there’s a lot to be said for employers who plan ahead. Undoubtedly, many changes caused by the pandemic have shifted the needs of employees and altered the ‘normal’ approach to open enrollment. However, planning has always (and will always) be a good idea—especially when it comes to group health plans.

Giving your organization time to plan and prepare will help you improve the absolutely critical process of implementing your benefits package, which has *major* repercussions on your return on investment (ROI). Start by following these three steps.

1. Consider changes to your benefits offering

Pandemic or no, employee needs are constantly changing. They have changed significantly over the past year and will continue to change as our country adjusts how we approach work. Since employee benefits are such a significant investment for employers, it only makes sense to meticulously review what benefits are most popular and what benefits don’t hold as much value.

Survey your employees and do your research. Since the start of the pandemic, some benefits have risen in popularity as employee needs have changed.

These include:

  • Virtual healthcare
  • Flex work, childcare, and elderly care
  • Financial wellness
  • Mental healthcare

Talk to your broker about your options and create a strategy that fits the needs of your employee population, as needs and wants can vary broadly. One size does not fit all for an attractive benefits package.

2. Open enrollment planning

Depending on the shifts your organization made since the pandemic, it’s important to consider how you will proceed with open enrollment this fall. Organizing a supportive and education-based strategy to guide your employees through enrollment can make a real impact on the employee experience during the process and increase plan utilization by employees.

  • Consider how to create a system that works for your employees wherever they are (on-site or remote).
  • Provide resources and support to employees as they make their decisions. These can include educational resources (such as this glossary of standard benefit terms), in-person or virtual support, and clear communication around deadlines and qualifications.
  • Get feedback from your employees before open enrollment about their experience last year and their concerns and needs for the upcoming season. Find common trends to help you fill in gaps that you may have missed in years past.

3. Preparing for implementation

Spend time reviewing and improving your plan of execution. This plan should include a detailed communication strategy, employee education, and year-round support. If you want to see significant participation from your employees, you need to engage with consistent support and education strategies. Ask your employees if:

  • They understand the benefits available to them. Do you offer an HSA or self-insured plan? If so, make sure your employees have a proper understanding of how these different plans work and what to expect when they participate.
  • They know where to go to ask for help. Do they have access to a support line? Are there online resources you are providing them?

Consistent and clear communication is a critical part of ensuring your employees participate in and get the most out of the benefit plan you’re offering. Consider which channels you will be relying upon (email, meetings, one-on-one support, a web page, etc.) to get the word out and offer support. Get clear on how and when you’ll use these channels and stay consistent in using them.

Preparation = success

The more you plan, the better you can guide your employees and your organization through the process of open enrollment. This isn’t the sort of thing you want to put off until the last minute or until your broker comes to talk to you.

Employee benefits are a crucial part of your employee engagement, retention, attraction, and ultimately, the business’s success. And as such, they require and deserve careful planning. By starting with these three steps, you’ll set your organization, and your employees, up for success.

 

 

Content provided by Q4iNetwork and partners

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A Crash Course in Group Health Insurance Plans

When it comes to health insurance, people want the right amount of coverage. They also want coverage for what they see as high value (doctor’s visits, medical procedures, etc.). There are many insurance plans out there—the traditional fully insured plan, the level-funded plan, the self-funded plan…and you may be wondering what the difference is between them, and where to even begin.

Welcome to our crash course in group health insurance plans.

Where it all began—fully insured plans

Fully insured plans are probably what come to mind when you think of group health insurance plans. Employers get the plan from an insurance company (carrier) and pay a premium to the insurance company. The yearly premium rates depend on how many employees are enrolled in the plan. When employees make a claim, the insurance company writes a check to the healthcare provider (hospital, doctor, etc.). Employees are responsible for paying the deductibles and co-pays defined in the plan.

A fully insured plan usually includes coverage for medical procedures, prescriptions, and doctor’s visits. Employers tend to go the route of fully insured for their business if they want to give their employees predictable benefits that remain consistent over time and provide the business with a regular monthly fee to manage cash flow.

New paths and steppingstones—level-funded plans

Level-funded plans are the go-betweens, the bridge between a fully insured plan and a self-funded plan (which we will discuss in a minute).

With level-funded plans, employers pay a set amount of money each month to the insurance company that funds a reserve account for claims and manages administrative costs and fees. Rates for a level-funded plan is defined by the number of employees and the estimated cost of anticipated claims. If the employer has a surplus of claims funds at the end of the year, they will receive a refund. If the claims are higher than estimated, they will receive a premium increase for any stop-loss coverage an employer has.

Employers usually choose level-funded plans if they anticipate employees not making many insurance claims and want to offer their employees insurance at an affordable cost. It also allows ease of access to utilization trends that show where employees might be overspending and allows employers to use education and wellness programs to improve claims costs.

Rise in popularity—self-funded plans

The popularity of self-funded plans is on the rise. A report published in 2020 found that 60% of workers in companies with three or more employees were on some kind of self-funded plan. But how does it work, exactly?

With self-funded plans, or self-insured plans, an insurance company provides administrative services. Like with level-funded plans, there is a fixed cost for administrative fees. But unlike level-funded plans, employers assume all the costs and financial risks in a self-funded plan. They pay for employee health claims from a bank account or trust fund set up for that purpose.

These plans have the highest amount of risk; however, employers can have stop-loss insurance that reimburses them for claims that exceed a predetermined level. There are two types of stop-loss insurance:

  • Specific stop-loss coverage, or individual stop-loss coverage, provides protection for employers against a high claim for any one employee. For example, if employers want a maximum liability of $150,000 per person, and an employee makes $200,000 in medical claims, specific stop-loss reimburses the employer for the $50,000 in excess claims.
  • Aggregate stop-loss coverage provides a set coverage ceiling on the amount of eligible expenses employers pay during that contract period. In other words, this is the coverage for all the employees total, not just for any one specific employee.

While self-funded plans can be expensive without stop-loss coverage, many employers find self-funded plans attractive. If they don’t need to pay fixed monthly premiums and they want to proactively manage claims costs with a hands-on approach, such as steering employees to high-value, low-cost providers and taking advantage of clinical wellness programs, self-funding may be a good fit.

One size doesn’t fit all

What’s right for one company may not be right for you. There are many different health insurance plans and different plan options, and taking a route doesn’t mean you take the route alone. Many advisors are well-educated in level-funding and self-funding.

Start a conversation with your broker to find out if this is in their area of specialty. Whether it is or not, do your research so you can fully participate in the conversations to determine what is the best for you and your employees.

 

 

Content provided by Q4iNetwork and partners

Photo by bowie15

With Great Power Comes Great Responsibility

With great power comes great responsibility, and great responsibility calls for regular reflection upon who you are as a leader and how you are growing.

Regular periods of self-reflection are needed to ensure that we are heading in the right direction regarding empowering our people, making progress towards our vision, and creating a sustainable legacy over the long term.

Asking meaningful questions that bring you discomfort and get to the heart of what it means to be a leader can show you how well you measure up and highlight areas where your attention is needed.

Is the ‘Why’ of what I’m doing the same as it was when I started?

Change is inevitable. Processes, plans, priorities, and even those on your team will change or evolve. Your Why/Purpose is what drives you to emotionally do what you do. It’s the rock upon which everything is built, and it drives every decision you make in the organization, which is why it’s important to consistently reflect on it.

Start by asking, “Is the ‘why’ of what I’m doing the same as it was when I started?” If your ‘why’ has shifted, then you may have strayed from your values or mission. If that’s the case, ask yourself what strategies you can create to ensure a successful re-alignment, so your purpose continues to drive your organization. If you want to inspire people to get behind your purpose and vision, they need to believe in what you believe in.

How am I developing as a leader?

There are no perfect leaders, so if you think you have it all figured out and that you’re at the pinnacle level of leadership, then it’s time to reflect on how you’re developing. Leaders who remain agile and curious and who value continuous development are best able to adapt to the most significant and most unexpected challenges.

Reflect on how you’re developing. If your list is limited, contemplate how you can seek opportunities to grow and develop your skills as a leader in your organization.

Am I as accessible as I can be?

Take a moment to reflect on this question.

Did you think of physical availability? For example, perhaps, you considered yourself accessible because you have an “open-door policy” or a “virtual communication policy” if you’re remote. If so, it’s essential to differentiate physical availability and accessibility.

Accessibility goes beyond physical availability because it’s everything that happens the moment someone walks in your door and your accountability that follows. Now reflect on this question again and ask yourself:

  • Have I created an environment that encourages people to come to me in need?
  • Am I providing enough support?
  • Do I demonstrate genuine appreciation and gratitude for my team members?
  • Am I actively listening to others’ input? 
  • Do I consistently follow up with people?

For example, if you’re going to encourage your team to share their input and ideas because you one time read in an article that you should, ask yourself if you’re genuine. Especially in the case of leadership, actions speak louder than your words.

Have I been seeking enough feedback?

There are copious amounts of people who don’t seek feedback because it could bruise the ego or harm our self-confidence, but as the saying goes – no pain, no gain. One of the most courageous acts you can perform is to seek honest and constructive feedback on your performance as a leader. You can do this during team performance reviews or one-to-one employee check-ins.

Actively seek out suggestions on how you can improve and support your team. It’s critical to follow through and integrate feedback for it to make a meaningful impact. Take this feedback, reflect on it some more, and embrace how you can grow as a leader.

Self-reflection makes the best leaders

Just as leaders expect certain standards from their people, their position as a leader holds them to greater standards.

Regular periods of self-reflection are needed to ensure that you’re holding yourself to this standard and that you’re heading in the right direction.

Regardless of whether you’re in a leadership position or not, these questions can help you bolster your strengths and make any necessary improvements that will enhance your ability to be of greater service and benefit to yourself as well as others.

 

Content provided by Q4iNetwork and partners

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Three Steps to Honing Your Message

Developing powerful messaging can be one of the toughest challenges businesses face in marketing and branding. You do so much, and you know it all, but how do you convey your organization’s value to your audience? How do you tell them the 1,000 reasons to work with you in under 50 words?

Many businesses focus on the wrong things to try and connect with their audience, leaving them no closer to their goal and with a whole lot of wasted time and effort on their hands. Gone are the days of people caring how old your business is; gone are the days of long stuffy bios and dense, technical language.

Effective messaging doesn’t have to be a mystery. It simply takes the right approach to get to the message you’re looking for.

Where to start

When hiring someone outside your organization to help with marketing, a common tactic is to research your top three competitors and base your messaging on what they learned. They’re hoping to find out what you’re up against, what is successful for others in your industry niche, and where the bar is set.

But this strategy is deeply flawed. It starts on the premise that your competitors know what they’re doing, which very often they don’t. (They probably looked at competitors’ websites, too!)

The second problem with this approach is that it only reflects what has already been done and will only work to ensure your messaging becomes a copycat of theirs, undermining your unique perspective and value. Essentially, it puts another company’s words in your mouth—and your competitor’s at that!

So, instead of looking back at the lagging indicator created by what other organizations have done in the past, start by looking to the future. Your future. Ask yourself where your organization is now and envision where you want to go. Your message should reflect where you are now and project the future with you and your client in it.

Define your audience

Before you write anything, start by defining your audience. Identify who your ideal customer is and what brings them to you. What are their worries, challenges, and pain points, and why are you the organization to help them overcome those things?

Once you’ve identified the face of your audience and you’ve identified their challenges, envision their future. Envision how their future will be improved through what you can offer them. Create a message that allows them to see a better version of their future selves. Work to reflect their pain points back to them in the form of their aspirations, enabled by you.

Simplify

One of the quickest ways to lose someone’s attention is to overload them with information. Read through your message from the perspective of your ideal customer. Are you providing them with information they don’t need at the moment? Are you getting wordy about your excellent organization and all the fantastic things you do?

While it may make you feel good, it only makes it harder for your ideal customer to get what they need. People are busy. They have a lot to do and little time to do it, and they want the easiest, most transparent, most obvious solution. They shouldn’t have to expend effort to understand what you do or know the obvious next step. If they do, they’ll leave and probably never come back.

Your message should only give people precisely what they need at that moment. No more, no less.

Keep working at it

As your business develops and grows, so should your messaging. Consider it a living, breathing part of your organization that needs to be fed and allowed to evolve.

Don’t hold your messaging hostage to old, stuffy language just because that’s the way you’ve always done it. Keep coming back to it, evaluating its effectiveness, and giving it room to change. It takes serious effort, but with every inch of messaging effort you put in, your customers receive a mile in value.

 

 

Content provided by Q4iNetwork and partners

Photo by gstockstudio