All You Need To Know About Alternative Healthcare Funding
In today's highly competitive hiring climate, companies must continually develop creative strategies to entice and retain top talents. Exceptional employee benefits are, no doubt, among the top factors that influence employee engagement and retention in the modern workforce. Ranking high on the list of preferred benefits is health insurance.
However, traditional employee health insurance programs are quite expensive for most businesses to fund and there is a high possibility that these healthcare costs will keep rising. Employers could raise deductibles, copays, coinsurance, and other costs, but these are sometimes just band-aid solutions that are not sustainable.
Therefore, it comes as no surprise that in recent years, employers are exploring alternative healthcare funding plans that will give them more control over the cost of their employee healthcare program.
What are Alternative Healthcare Services?
Alternative health care services (also known as complementary health care) are health treatments that are typically not provided in a traditional Western medicine practice or part of common health insurance plans. There are quite a number of them. Common alternative healthcare treatments include acupuncture, homeopathy, Ayurveda, Oriental (Chinese) medicine, neuropathy, and several others.
These healthcare services focus on fostering health through a balance between the mind, body, spirit, and environment. Alternative medicine has increasingly become popular in America because it gives patients choices. These choices allow patients to make lifestyle changes, cut back on the cost of medical services, and participate actively in their medical treatment.
What is Alternative Healthcare Funding?
Alternative Healthcare Funding is a novel approach to group health insurance that allows mid-size firms to enjoy the same financial advantages that large, self-funded employers have enjoyed over the years. It is a self-funded strategy with stop-loss insurance at relatively low attachment points to guard against major risk and exposure to big claims for smaller firms.
Alternative healthcare funding operates on two guiding principles:
Reduce the severity (cost) of claims your company will have.
Reduce the frequency (number) of claims your company has overall.
By strictly upholding these two principles, alternative healthcare funding will assist your business in proactively managing your healthcare program rather than reacting to it.
Alternative Healthcare Funding Plans
Here are 6 trending alternative healthcare funding options you can adopt in your organization.
1. Self-Funded Insurance
In a self-funded plan, the employer handles medical claims on their own, without contracting to an insurance company. The employer establishes premium rates based on anticipated claims with the assistance of its experts. Employers often hire a third-party administrator to handle claims administration, lease provider networks, and purchase stop-loss insurance to safeguard the plan against significant and erratic claims.
The profit potential is significantly bigger because you are taking on the majority of the administrative work. With this change, a lower percentage of your premium money will be used for plan administration, which is the intended outcome. Employers can reduce their monthly expenses and increase cash flow by only paying the funds for claims/reserves and a minor administrative fee. Additionally, employers are shielded against the unforeseen or unexpected costs associated with shocking claims, such as cancer diagnosis or major accidents, by this feature.
This method of funding had previously been employed mostly by big organizations. It was quite uncommon for businesses with a lower employee force to follow this course due to the risk of a year with very high claims. However, as healthcare costs continue to rise, more and more small to mid-sized businesses are considering self-funded plans as a way to save money.
2. Level-Funded Insurance
Level funding is a variation of the self-funded plan with the same amount of benefits but lesser risk. They offer a good compromise between fully insured and self-funded programs. A level-funded plan divides the premium into two funds, one for administrative expenditures and the other for funding claims, with predetermined monthly costs. As premiums are paid throughout the year, the administrative part of the premium is forfeited to the insurance company, which is still in charge of managing the plan and paying claims.
The benefit of level funding comes when the cost of claims for a given year is less than the entire amount of premium money set aside for covering employee claims. The employer is then given a premium credit in exchange for a percentage of the earnings. The insurance company will reimburse the expense in the event of a shocking claim with less impact on the business than with a self-funded plan. Level funding is a low-risk approach to enjoying the benefits of encouraging wellness and lowering claims among your employees.
Plans with level funding are an excellent approach for businesses to experiment with self-funding. With the help of the claims reporting tools, businesses can learn more about the types of claims that their workers submit on an annual basis and gauge the possible effects of converting to a self-funded plan.
3. Group Medical Captive Insurance
Group Medical Captives have long been used in the workers' compensation insurance sector, but they are just recently being applied to employee benefits. A captive agreement combines multiple employers who sign risk-sharing agreements through a single administrator. An administrator controls a captive, who also helps reduce the risk for each employer as they transition to self-insurance.
By distributing the risk among its owners, a captive reduces the risk involved with a self-funded plan. Each employer group owner contributes money to a risk pool that serves as a claim shock absorber. At the end of the period, any leftover money is given back to the captive's owners.
For small and mid-size firms, an employee benefits captive is frequently the most alluring alternative healthcare funding option, since the self-financing strategy brings together several employers in a collective risk-sharing agreement. If properly managed, group medical captive insurance will lower risk and volatility for the participating firms, assist in minimizing the financial impact of any unexpectedly high medical costs, and give employers relevant data to manage their healthcare programs. The key to the success of the captive program is choosing a group captive manager with the appropriate captive members.
In consortium plans, participants can combine the benefits of self-funding with the security and stability of shared-risk insured plans, all while becoming a part of a sizable purchasing group. The difference is that consortium members are not owners and did not incur an initial financial commitment. Each member retains full transparency in the billing, renewal, and claim usage processes and their independence and perks. All of the surpluses are under the members' control and management.
5. Private Exchanges
Under private exchanges, employers select health plans and services and then offer their employees the choice to select the policies and services they prefer. Employers set aside money for their employees to purchase benefits, and they also give them the choice to voluntarily pay more cash if they wish to have greater coverage than what their allotted funds can cover. Usually, this form of defined contribution model is supported by a digital, decision-making platform. Under this form of alternative funding, employees need to be educated about their plan options. Without assistance, workers might be unable to make wise selections, which would result in inadequate coverage and dissatisfaction.
6. Post-Deductible Health Reimbursement Arrangements (HRA)
The post-deductible HRA is a strategy that combines an employer-funded HRA with the out-of-pocket limit, a built-in stop-loss of fully-insured health plans, to assist cover employee expenditures. This concept can reduce premium costs for both companies and employees and redirect those savings to member claims.
Alternative healthcare funding strategies might occasionally be challenging to understand. With the rising cost of healthcare, it's important to work with a benefits consultant who can explain these alternative funding strategies to you and, if necessary, help you implement them.
At Quantum Benefits, we offer health plan consultancy services and provide you with high-quality healthcare options that your employees would love while saving your business a sizable amount of money. Give us a call today at (203) 856-6363 or fill out our contact form to speak with a representative.
This content is powered by Mission.