Funding Alternatives - Right For You?

Are there real alternatives to a traditional fully insured contract for smaller companies? Maybe.. There do exist financing alternatives to the traditional insured contract for health insurance benefits. Self insured alternatives, minimum premium options and premium drags do exist and can be negotiated with health insurance carriers. However, you really need to take a close look internally to understand what the potential exposure could be.

Smaller firms (under 250 covered lives) really need to do some homework to understand potential risk exposures inside of thier covered pool. There are ways today (even with HIPAA) to get a better feel for the health of a companies population. Some large claim data is available from carriers but beyond that, most carriers do not share claims experience.

Prior to looking at a self funded medical option, I work closely with my clients to do a risk assessment of the current group. Usually, this is in the form of a wellness plan that will measure basic risks using a tool of some sort - usually a questionnaire. From that, global data can be reviewed that is a good indicator of future claims experience. If there is an abnormally high propensity towards cardiac conditions or diabetes, those types of factors can be taken into consideration prior to entering a risk based contract.

You usually gain cash flow and more control over dollars spent in this area but you give up the protection of pooling your claims experience with a carrier's block of companies of a similar size. Your consultant should be looking at all possible alternatives of premium financing with you. Just make sure that there is a thoughtful approach and a realistic feel for the advantages and disadvantages before entering into a risk based contract.