A health plan is divided into two parts:
1. Insured benefits, which on average is 20% of your premiums. This is based on gender, age, salary, and occupation. It consists of;
- Life insurance
- Long-term disability
- Travel health coverage
- Accidental death and dismemberment
- Stop Loss
These benefits are covered by insurance companies in both traditional and auto insured models. This is considered real insurance as the risks are great.
2. Experience-Rated Benefits, which on average is 80% of your premiums. This is solely based on the experience of the group hence its name. It consists of:
- Drug costs (including prescription drugs and paramedical services)
- Dental care
- Short-term disability
- Vision care
Traditional model:
You pay a yearly premium to an insurance company for your experience rated benefits.
If your claims (experience rated benefits) are HIGHER than your yearly premiums = LARGE INCREASE.
If your claims (experience rated benefits) are LOWER than your yearly premiums = SMALL INCREASE.
Self-insured model:
According to your previous year’s experience rated benefits, you set a budget as your yearly premiums.
If your claims (experience rated benefits) are HIGHER than your yearly premiums = ADJUST RATES.
If your claims (experience rated benefits) are LOWER than your yearly premiums = REDUCE RATES or ADD ADDITIONAL BENEFITS.
In both models, a STOP LOSS (reassurance) is put in place to protect from high claims.
- In the self-insured model, the administrative fees are considerably lower than the traditional model.
- A self-insured model administered through the right channel does not require any more administrative work than the traditional model.
- The self-insured model allows companies to take control of their plans, thus never having to change insurers again.
To learn more about the self-insured model, join us at our lunch and learn on May 2nd, 2019 at the Graziella Restaurant. Spots are limited, sign up now!
