While traditional fully-funded healthcare can be expensive and self-funded coverage comes with a significant financial risk, partially self-insuring melds the two into a more affordable health insurance option with less monetary risk.
With partial self-insurance organizations purchase less expensive, high-deductible healthcare plans (HDHPs) for employees, and then provide a reserve account of supplementary funds to cover out-of-pocket expenses. The benefits are twofold: 1) organizations garner significant savings by only paying for services that employees use, and then reinvest remaining reserve money at the end of the year; and 2) employers can attract and retain top talent by offering improved employee benefit packages along with substantially lower out-of-pocket expenses for healthcare.
That said, while the HDHP acts as a stop-loss insurance of sorts, employers are still on the line to cover the complete deductible in the event of a catastrophe or high claims year – something nonprofit budgets may not be able to withstand. A second challenge comes with the management of partial-self insurance, which involves working with consultants and third party administrators. For nonprofit organizations that are already stretching staff to their limits, adding more management tasks to workloads may not be a feasible option.
However even with the challenges, exploring partial self-insurance could be the first step for midsize nonprofit organizations towards saving valuable operating expenses and improving employee benefits.
A full copy of The Nonprofit Executive’s Guide to Partial Self-Insurance can be downloaded here. To learn about innovative healthcare broker Nonstop’s unique approach to both the benefits and challenges of partial self-insurance, please contact us.
The information and materials herein are provided for general information purposes only and are not intended to constitute legal or other advice or opinions on any specific matters and are not intended to replace the advice of a qualified attorney, plan provider or other professional advisor. This information has been taken from sources believed to be reliable, but there is no guarantee as to its accuracy. In accordance with IRS Circular 230, this communication is not intended or written to be used, and cannot be used as or considered a ‘covered opinion’ or other written tax advice and should not be relied upon for any purpose other than its intended purpose