Traditional Health Insurance vs. Self Funded Insurance Plans

An important part of opening your own business is deciding on the type of employment benefits you are going to offer to your staff. Many people do not bother to apply for positions that do not come with incentives besides a paycheck. When it comes to health coverage, you have two basic choices: traditional health insurance and self funded insurance plans. Which one is best for your business?

With a traditional health insurance plan, you would pay a premium in exchange for coverage. The rates you pay are set at the beginning of each year and are based on the number employees you have and the average number of claims your business puts in. You premium will only change during the year if you add on additional staff members.

With self funded plans, there is not a premium, but there are still required payments, which are often billed to your business on a monthly basis. These may include administration fees, variable costs, and stop-loss expenses. You as the employer would pay the costs of the claims, which will change according to how many employees visit a doctor in any given month.

Should you choose traditional or self funded insurance plans? It all depends on your employees’ level of health. Small businesses that employ relatively young individuals with no long-term health issues may be able to save money with self-funded plans. On the other hand, if you have a larger business or have employees that are more likely to need regular medical attention, traditional insurance might be a more viable choice.

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