Every small business needs great Advisors

Traditionally, when people talked about insurance, it was “Fully Insured”. The employer or its employee pays a premium to the insurance company in return for paying future “covered” medical claims that are beyond the “out of pocket” maximum (the amount that employees and their families will pay for that service). The totality of risk for the medical claims is borne by the insurance company. As insurance is a for-profit industry, the insurance company must cover its risk and make money. As the cost of medical care increases, so too do the premiums. In fact, according to the latest Kaiser Family Foundation Report, average annual employee contributions to premiums and total premiums for single coverage have risen nearly 22% over the past 5 years.

On the other end of the offering spectrum from traditional insurance are self-insured plans.  These health benefits plans are created by and for the employers that fund them.  In most instances, an employer will then hire professional actuaries, a plan administrator (a third party administrator) to manage the plan and contract with a reinsurance (or Stop-Loss) carrier to cover claims above a certain cost.  This Stop-Loss insurance comes at a premium for the employer.  In almost all instances, small businesses (those with less than 499 employees) find it difficult to predict with any accuracy.

Over the past 15 years,  a middle ground between “self-funded” plans and “traditional” insurance has emerged.  These “level-funded” plans are a fairly simple type of self-funding that are designed for small businesses.  Plan providers (such as Detego Health) establish a Third Party Administrator and get approved by a  stop-loss carrier who agrees to cover claims above a certain amount.  As these plans don’t need to be rated at a community level (as is the case with traditional insurance), level-funded plans generally cost less and minimize the risk to employers, but only if the TPA knows how to balance cost-control with excellent healthcare and customer service.