A New Chapter for Health Plans

A New Chapter for Health Plans
The Congressional Budget Office is projecting health insurance pricing to rise significantly over the next 10 years. Now more than ever, many employers should seriously consider changing how they fund their health plan.

Paying an insurer to take full risk is equivalent in many ways to renting a house. The premium/rent paid out is never returned when expenses are lower than expected. The policy holder/occupant is not in control of design, quality, or maintenance.

Participating in a captive for health plan stop loss is very similar to purchasing a condominium with a co-op arrangement. The costs associated with design, maintenance, and repairs are shared. Under a captive or a co-op, the employers / condo owners with fewer expenses end up subsidizing those with greater expenses. Often, those larger expenditures can be attributed to poor choices made by the employer / condo owner in managing their own population / condominium. As a consequence, an employer who manages it’s own population’s health more effectively than other employers inside the captive is not compensated for the effort.

It’s a new chapter for health plans. The stop loss market is very competitive and growing. In addition, there are many new hybrid self-funding arrangements which lower the risk for smaller employers. Whether fully insured or using a stop loss captive, it’s a good time to explore other funding options.

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