As health care cost increases show no signs of abating, employers continue to seek new and creative ways to control their benefits costs. Pairing self-insurance, where an employer funds its own medical expenses, with stop-loss coverage is an increasingly popular option to help employers gain more control over these costs.
While self-insurance provides greater control as well as financial and regulatory protection for employers, it does not help employees who may also be faced with increased deductibles and other out-of-pocket costs. Employers should consider extending a modest level of critical illness coverage — perhaps $2,000 to $5,000 — to their employees, so when a catastrophic claim occurs, both the employer and employee are financially covered.
A case study
Consider a 1,000 life company that is fully insured and moves to self-insurance. According to the Kaiser Family Foundation’s Employer Health Benefits 2012 Survey, the employer will save approximately $150 per employee or $385 per family without accounting for any plan changes they may make as a result of the switch, such as eliminating state-mandated benefits.