Attempting to inform the average American consumer that healthcare costs are spiraling out of control would run the risk of you being labeled Captain Obvious. Everybody knows that both healthcare services and health insurance keep going up with no end in sight. Even combining a high deductible health plan (HDHP) with a health savings account (HSA) doesn’t always guarantee affordability.
If the HDHP-HSA combination cannot keep costs under control, is there anything employers and their employees can do? There are never any guarantees, but a self-funded health plan may be the best among all available options.
How a Self-Funded Plan Works
Conventional health insurance is funded entirely by an insurance company. Monthly premiums go to cover the insurer’s costs, but the carrier ultimately pays all covered bills irrespective of premium collections. All the financial responsibility is with the carrier.
A self-funded plan is funded entirely by the employer. The employer estimates its healthcare costs for the coming year, then establishes a separate financial fund to cover those costs. The money for that fund comes from employer contributions and employee payroll deductions.
Self-Funded Plans Are Comparable
StarMed (visit website here) is a third-party health plan administrator based in Las Vegas. They say that self-funded plans are comparable in terms of the benefits they offer. For example, a typical plan covers office visits to the family doctor. It might offer telemedicine visits with no copay as a way to encourage patients to avoid more costly in-office visits.
Regardless of the details, self-funded plans offer many of the same benefits as traditional insurance. As an added bonus, they tend to offer greater flexibility to both employers and employees. Some plans even go so far as to offer benefits that conventional insurance companies will not touch.
How HDHP-HSA Plans Compare
Some 20 years ago, employers began offering HDHPs as a way of providing health insurance at a lower cost. HDHPs are more affordable for both employers and employees. Unfortunately, higher deductibles ultimately mean that employees pay more out-of-pocket until their deductibles are met. Enter the HSA.
HSAs are tax-free accounts into which employees can contribute funds dedicated to covering healthcare expenses. Employers are also allowed to contribute if they wish. As the thinking goes, funds from an HSA can go toward paying healthcare expenses while an employee is working toward satisfying their deductible.
The HDHP-HSA combination delivers as promised. It provides a more affordable alternative to conventional health insurance. But in the end, the savings might not be as dramatic as employers and employees had hoped. The challenges with this sort of arrangement are rooted in how high deductibles go as compared to the amount of money an employee can legally contribute to an HSA in a given year.
Self-Funding Is Worth Looking At
There is no arguing that the HDHP-HSA combination works well for a lot of employees. As such, employers continue to make it an option. But self-funding is always worth looking at. A self-funded health plan could provide all the same benefits as an HDHP-HSA combo at an even lower cost.
Employers looking to save even further on their health plans would do themselves a favor by looking into the self-funding option. If self-funding seems too risky, there are hybrid plans that combine the best aspects of self-funding with conventional insurance.
In the meantime, companies like StarMed are helping clients access more affordable health plans through self-funding. Their clients are able to offer affordable benefits to employees who would otherwise not be able to pay for conventional group insurance. Thank goodness that the self-funding option is out there.