Being an employer can be gratifying.
Providing meaningful work and gainful employment.
Witnessing your team’s dedication and hard work.
Helping employees reach their career goals.
Employees are a big part of your success. You want a compensation package that reflects your commitment but it’s getting harder and harder to contain rising health insurance costs. Higher deductibles may have helped slow premium increases, but for how much longer? According to the Kaiser Family Foundation, employers paid on average $5,711 for single coverage and $14,069 for family coverage in 2018. For perspective, employers paid on average $9,325 for family coverage in 2008. That’s an over 50% increase in 10 years!
If you’re managing your company’s health insurance, we can help. Partnering with a professional employer organization (PEO) gives you access to HR solutions you might not even realize existed and helps you navigate the evolving health insurance landscape. Your traditional plan may no longer meet your needs, so we’ll introduce you to new options. You’ll also benefit from our buying power for more competitive insurance premiums.
Health insurance is complex. While not solely guided by economics, it’s certainly a big consideration. The best way to take care of employees is by understanding the options. Compare them against what your employees’ value most.
What is fully-funded insurance?
This is health coverage where the insurance carrier assumes full risk and pays for all covered claims. Regardless of how many claims are submitted during the year, you pay the same monthly per-member premium. It is a predictable expense which is helpful when budgeting for the year. If your employees are healthy and don’t use the healthcare, however, you still pay the same amount. There are no rebates. Conversely, you’re protected if your employees’ healthcare needs suddenly increase. Annual premium increases are based on employee usage. Recent trends suggest you should expect a premium increase regardless of usage.
What is level-funded insurance?
With this type of coverage, insurers calculate an expected monthly expense based on your employee census and medical applications. This helps them determine potential risk factors for the group. The calculated monthly amount includes estimated annual claims allowance, stop-loss protection and an administrative fee. If claims exceed the allowance, the stop-loss coverage kicks in. This protects companies against paying more than the “level” amount. On the flip side, you get an end of the year rebate if monthly payments exceed the claims. The group’s annual performance will determine if the level amount should decrease, increase or stay the same the following year. You’ll benefit from consistent cash flow while being prepared to cover claims.
What is self-funded insurance
With this structure, all risk shifts completely to the employer with participating employees essentially forming an “insurance pool” from their monthly premiums. Based on healthcare spending predictions, a professional actuary determines the monthly premium. A third-party administrator (TPA) contracts with an existing insurance carrier for the use of their network. The TPA also processes and pays claims from the premium pool. With healthy employees, fewer claims means less money is spent. There’s no fixed premium to worry about. Since claims are self-funded, wellness programs and incentives can help minimize claims. Similar to level-funded, you can purchase stop-loss coverage to protect against an unexpected volume of claims.
While these various structures may offer some relief from rising health care costs, compensation packages should be more than just health insurance. There’s a wealth of exciting HR benefits that can demonstrate your care and dedication. Consider outsourcing HR to a PEO for expert guidance in creating a tailored package. You will benefit from a team of experts with creative solutions that could help you offset rising health insurance costs in addition to managing payroll and taxes, retirement, workers compensation and other unique benefits.
As a certified professional employer organization (CPEO), Illinois based MidwestHR has been successfully partnering with clients for over 20 years. Give us a call at 630-836-3000 and discover how HR strategies can help contain costs and engage employees.