Credit unions know that high-quality healthcare benefits are a key recruiting and retention tool in the ultra-competitive job market. That’s why as a credit union executive, you’re always looking for ways to keep rising healthcare costs from impacting the caliber of benefits available to attract and keep talented employees.
In pursuit of alternative paths, many CU executives are considering self-insured (or self-funded) healthcare plans. Still, some may have misconceptions about such an alternative to traditional fully insured employer-sponsored group health insurance.
What can I expect from a self-insured plan?
The concept of self-insurance is simple: The employer sets up a trust for insurance claims funded by company and employee contributions. This money covers employee healthcare claims on an as-needed basis.
Because they avoid middleman fees, state premium taxes and traditional insurance profit margins, self-insured plans can be substantially less expensive than fully insured plans. And unlike fully insured plans with fixed premiums, companies only pay for what their employees use.
Credit unions wondering if it all sounds a little too good to be true may be wary of self-funded plans. Common questions include:
- Can self-insured plans provide the same quality of care?
- Isn’t there a risk to the organization if costs are higher than anticipated?
- Wouldn’t it be complicated to manage a plan like this?
It’s important to address concerns before moving forward with any healthcare plan decision. Let’s review four of the most common misconceptions credit unions have about self-insurance.
1. Our credit union is too small for it to work
Doesn’t self-insurance only apply to the big guys with deep pockets who can spread the risk out over hundreds or thousands of employees?
In the past, larger organizations had more access to self-insurance options, but the model is rapidly gaining popularity with small companies. As of 2020, 16.1% of small companies (fewer than 100 employees), and 31.7% of mid-sized companies (100–499 employees) offered at least one self-insured plan.
There’s indeed power in numbers, but those numbers don’t have to be based solely on your employees. Suppose your credit union isn’t large enough to negotiate direct contracts with healthcare networks on its own. In that case, you can join forces with other smaller organizations and have third-party administrators (TPAs) and benefit advisers negotiate contracts on your behalf.
2. Our employees won’t like it
A big concern about self-insurance is that employees won’t have access to the quality of care they deserve. What if they lose their doctors, or the coverage doesn’t meet their needs? Employers may also be worried that the plan’s structure could be overly complicated or burdensome to employees.
In fact, self-insured plans often have the familiar structure of national physician/hospital networks, co-pays, deductibles and out-of-pocket maximums but are significantly more flexible than fully insured plans. With traditional fully insured plans, you usually pay for a blend of services, some of which your employees may never need. But with a self-insured plan, your credit union is not limited to a blanket policy created by an outside company. You can design a plan and contract with the providers and networks that work best for your employees’ needs.
Self-insured plans also aren’t subject to state insurance requirements, meaning that you can offer identical, high-quality coverage to all your employees, no matter where in the U.S. they live.
Another advantage is that the data you glean from full access to your self-funded healthcare coverage reports allows you to make better decisions about the future. With each passing year, you can create a more customized plan to meet the needs of your employees.
3. Creating a plan is too complicated
Understandably, the “self” part of self-insured is often a sticking point. After all, you’re a credit union, not an insurance company. The thought of setting up, customizing and administering a plan can be intimidating.
Fortunately, there’s help. Your credit union can work with advisers and plan design specialists to select the most appropriate benefits and contract with TPAs to handle claims, safeguard privacy and manage the plan.
These partners can also analyze data about claims, assist with employee education, and ensure your plan complies with federal mandates. For example, an adviser can help your credit union breakdown previous years’ claims data to demonstrate real-world cost savings potential specific to your company’s plan, so you’re making a decision based on concrete information. This type of transparency is hard to come by with a traditional fully insured plan.
4. The risk of unexpected expenses is too high
On the surface, “you only pay for what you use” sounds like a good deal. But what if an employee gets cancer, has a premature baby or suffers a catastrophic health event? A single event could cost hundreds, thousands or even millions of dollars. Isn’t your credit union on the hook for those expenses?
This is a legitimate concern of organizations that self-insure, as is the danger that overall healthcare costs could rise higher than anticipated. Fortunately, you can protect yourself against unanticipated healthcare costs with stop-loss insurance.
There are two types of stop-loss insurance.
- Individual or specific stop-loss protects the employer against unusually high claims by individual employees.
- Aggregate stop-loss protects the employer against an overall rise in healthcare costs by placing a cap on the total expenses that an employer is responsible for in a given period.
This allows your credit union to control the precise amount of risk that you’re willing to assume. Even factoring in stop-loss insurance premiums, a self-funded plan is usually less expensive than a fully funded one. You get the best of both worlds: only pay for what you use with simultaneous protection against high costs.
Although healthcare costs will continue to rise, you can be empowered knowing that there is something your credit union can do to manage it. To learn more about taking control of your credit union’s healthcare benefits through a self-insurance plan, schedule a free consultation with us today!