Some employers in the United States enroll in self-funded insurance because of the steep increase in health care costs. A report shows that 17 percent of small firms and 80 percent of large organizations have self-funded insurance. Many choose this insurance to save money for capital investments, company operating costs, employee wage increases, and retirement plans, among other priorities. As an employer or an HR manager thinking about signing up for self-funded insurance, you’d want to know how many employees are required to be considered for a self-funded insurance plan. Read on to learn more about how many employees for self-funded health insurance you need.
What is a Self-Funded Insurance Plan?
Self-funded insurance plan is one in which an employer uses their money to pay claims for their employees and any covered dependents. The employer takes up the risk by becoming directly financially liable for paying the cost of covered health benefits provided to the employees. Self-funded insurance plan is not typically subject to state insurance regulation. This is unlike a fully insured plan where an employer pays premiums to an insurance company that later pays the employee claims based on the covered benefits.
Typically, a self-funded employer pays money out of pocket. The employer typically hires a third-party administrator or a consultant to help design employee health benefits and coverage needs per the company budget. The consultant highlights essential items that will be part of the self-funded insurance plan. This includes covered expenses, eligibility to participate in the self-funded insurance plan, the amount to be set aside for self-funding, exclusions, and how insurance companies integrate into the benefits, among other essential elements.
How Many Employees Do You Have to Have to Offer Health Insurance?
Employers must observe the federal minimum standards and health laws for self-funded insurance. If you plan to implement a self-funded insurance plan, a typical rule of thumb requires an employer to have at least 100 employees covered. However, many organizations with over 30 employees opt for self-funding insurance plans. You can pursue this option if you provide health benefits to your employees and are ready to abide by the legal and fiduciary self-funding laws. It is best to work with a consultant or a third-party administrator to help determine if your organization is capable of self-funding. According to the Affordable Care Act, also called the health care law (ACA), small firms with 1 to 50 employees and full-time equivalent employees (FTEs) can opt for self-funded insurance plans.
Self-funded insurance plans come with out-of-pocket maximum limits and employer mandate requirements. If you have more than 50 employees with full-time equivalent employees and opt for self-funded insurance, you should provide minimum value, and the coverage should also be affordable. If you do not follow the regulations, you might face penalties. Self-funded insurance can provide small organizations with financial savings with tailored-made health benefit plans that suit both employer and employee needs. So, if you do not have the financial ability to enroll for fully-funded coverage, self-insurance could be the best option.
Self-Funded Insurance Plans Can Be a Good Option with Consistent Cash Flow
The above guide helps you know how many employees for self-funded health insurance you require to enroll in the coverage. However, it is worth noting that this option is suitable for businesses with consistent cash flow. This is why it is best to carefully analyze your budget and other critical elements while also following the deferral standards before signing up for a self-funded insurance plan. Contact us to get started and learn more about self-funding insurance plans.