Is Self-Insurance a Good Option for Your Mid-Size Company?
Self-insurance and claims data analysis are often thought to only be available to large companies, but there are ways mid-size companies can also benefit from this strategic approach. In fact, full control of your plan, data, and costs may make self-insurance an enticing option.
Many factors come into play when considering a self-funded plan design. Transitioning to self-insured plans may be a good option for organizations with 100–500 employees. (Note that large workplaces with 500+ employees are likely already self-funded or have a good reason for staying fully insured.) Third-party administrators (TPAs) can also help manage self-funded programs, from set-up to administration.
If you’re considering self-funding, here are some benefits and drawbacks:
Benefits:
- Data ownership and the ability to optimize the plan based on utilization and cost data
- Customizing a plan to meet the needs of your workforce
- More opportunities to select point solutions that align with your culture and goals
- Controlling fixed costs and plan reserves, enhanced cashflow, and maximizing interest income
Drawbacks:
- A learning curve for Human Resources and finance leadership
- Accounting complexity
- Higher potential risk
- Monthly cost variability
It can be intimidating and it’s not for every organization, but depending on your risk profile, you could see up to 10% savings by moving to a self-insurance program.
Work with a Knowledgeable Broker
A strategically focused broker can run a self-insurance feasibility analysis, which projects renewal costs and demographic risk analysis to move to a self-funded plan design. After reviewing the initial data and projections, your broker can then go to market to obtain quotes from your preferred solution providers. Your broker can walk you through what to expect and considerations, as well as the timeline to launching and collecting meaningful data.
Whether you have a fully funded or self-funded plan, data analysis of your claims costs can give you meaningful insights into how you can optimize your benefits offerings to better serve your employees and your budget.