With the cost of health care continuing to rise, many employers have asked us about alternatives to traditional health insurance plans. High prices are driven by a number of converging factors, including higher costs for pharmaceuticals, increasingly sophisticated technologies, reduced supplies of care providers and an aging population—and no end to the upward trend is in sight.
There are options for those seriously considering cancelling their employee health plans—and some may be worth investigating for your business. Here’s a run-down of the seven options we offer these frustrated CEOs.
1. Plan Cancellation
Few, in our experience, have chosen to implement this option which sends employees out to fend for themselves in individual markets, but is no-doubt tempting whenever new premium increases are announced. For competitive reasons and to keep their employees happy, most companies try their hardest to avoid this fate.
2. Fully Insured Grandfathered Plans
Some companies can experience transitional relief by adhering to a grandfathered plan that was in place before implementation of the Affordable Care Act (ACA). This can save them considerably, mostly because they can avoid some of the ACA’s mandatory provisions, such as pediatric dental and vision care. The downside is that they are not allowed to change their policy whatsoever, so no improvements can be made to the plan either.
3. Fully Insured ACA Compliant Plans
These are the standard fully insured “open market” plans that insurance companies offer. The plans have all the mandated Affordable Care Act provisions and are community rated in small group. Large group is still medically underwritten but also provides the ACA mandated changes.
4. Association Plans
In October, 2017, President Trump signed an order that expanded the ability of small trade and business groups within an industry to band together to purchase health insurance however there has to be a direct business connection between the companies. This allows small employers to come together and be treated as a large group, so their plans can be medically underwritten although they prohibit outright denial of coverage or discrimination against those with pre-existing conditions.
5. Self-Funded Plans
Under this scenario, a portion of claims are paid directly by the employer. Although an element of risk is involved, this option offers great flexibility in terms of plan design. For example, you can choose to create employee wellness and prevention plans to help reduce costs and keep your workforce healthy. With a self-funded plan, you can monitor claims closely and have a more vested interest in your employees’ overall health. In addition, you don’t have to pay a state premium tax, so you can save money at the outset.
6. Captive Insurance
A captive plan is when several self-insured employers band together to form their own insurance company. This option is geared mainly toward larger companies of 100 employees or more, offering the owners potential dividends and an incentive to develop an all-around healthier workforce.
7. Professional Employer Organization
These health plans have lost favor over the past several years because they force employers to relinquish control of their organization to a third party that administers HR and benefit responsibility for a collective group of companies. For those that can accept this limitation, this option is ideal for employers that want to spend more time on their central mission without the burden of administrative concerns.
This article was published in the Fall 2018 issue of the General Insurance Services Risk & Business Magazine. Access the full publication here