The rising cost of healthcare is forcing employers to explore new ways to provide benefits to their employees. It’s imperative that companies provide plans in the most cost-effective manner possible while also balancing the need to offer attractive plans that serve their current and prospective employees well.

Many employers are starting to move away from traditional fully insured health insurance plans to possibly save money and get cost certainty going forward. At the same time, transitioning to complete self-funded insurance plans can be scary and risky.

In this article, we’ll discuss another option — hybrid plans, which blend self-insured and fully-insured features into one plan.

What is a Fully-Insured Health Plan?

A fully-insured health plan is the traditional model of offering benefits to employees. The employer will buy group health coverage through an insurance carrier, and they handle covering all claims from the employees.

Employees pay a premium for the coverage, and the insurance carrier is responsible for handling all the claims and paying their share based on the plan’s benefits as well as cost provisions.

A big advantage of these plans is that they’re predictable. Employees and employers pay a stable premium every month for the year, which makes it easy to budget. How coverage is handled is clearly laid out in the plan details.

The premiums are tax-deductible, which is another major benefit of these plans. Plus, from an employer’s standpoint, all of the administrative tasks are off their plate, with the carrier and/or broker handling it.

The downside is that you have to renegotiate your plan every year, and costs can rise unexpectedly from one year to the next. Not only that, but these plans aren’t as flexible as some other options on the market.

What is a Self-Insured Health Plan?

With a self-insured health plan, the employer will act as the insurance carrier. They will assume all of the risks of managing and funding the plan.

The company will collect premiums and then will pay claims as employees submit them, with that money typically being held in a reserve or trust fund. Many employers who go this route will hire a third-party administrator to handle the administrative tasks associated with this type of plan.

A major advantage of self-insured plans is that the premiums aren’t inflated to help an insurance company make a profit. This could result in lower overall costs, both to the employer and its employees.

As the de facto insurance company, the employer has the freedom and flexibility to choose what benefits to offer, what levels of coverage and more. Employers can truly customize their plans to their needs and those of their employees.

The biggest potential downside is the financial risk the company is taking on.

If claims are high for a particular period, or if multiple catastrophic claims happen, then the company will have to find a way to pay them. While stop-loss coverage can help mitigate some of these risks, there’s still the potential for uneven and unpredictable costs.

In addition, there are many administrative responsibilities associated with a self-insured plan, even if the company outsources them to someone else.

What is a Hybrid Health Plan?

A hybrid plan, also known as a level-funded plan, blends together the potential cost-savings of self-insured plans with predictability of fully-insured plans. Businesses have more control with this type of plans, which are technically self-insured plans.

The costs of hybrid plans are based on the overall usage of the services offered, which means it’s essentially based on the overall health of your employees. Carriers handle setting the premiums for the plan, which are based on an analysis of claims filed from previous years or general demographics of your employee base.

In hybrid plans, stable monthly payments are made to cover the funding of claims, administrative costs and stop-loss insurance.

The great part is that if your company’s claims end up being lower than was expected, it’s possible for you to receive a refund at the end of each year. Conversely, if claims are higher than you expected, the stop-loss insurance will kick in to cover part of that difference.

Employers have more flexibility and choice with hybrid plans, since they don’t have to comply with many small-group rules under the Affordable Care Act or state requirements for insurance coverage.

Explore Hybrid Plans with Beckham Ellis Insurance Group

Hybrid health plans are becoming more popular as rising health care costs continue to pose challenges for employers and employees alike. They provide a nice combination of the predictability of fully-insured plans while offering potential cost savings and flexibility of self-insured plans.

To explore whether hybrid plans could be right for your company, work with the insurance experts at Beckham Ellis Insurance Group. We can help you analyze whether a hybrid plan would be beneficial to you and your employees, and get you set up with one if it is.

If your company is located in the Georgia or South Carolina region, contact us today to learn more.