Partial Self-Funded Insurance Benefits Nonprofits
OPINION -- On an almost daily basis these days we hear about the rising costs of healthcare and the impact on both employer and employee. In 2016, premiums are expected to rise in the double-digits in part due to ACA-imposed taxes, with much of those costs being shifted to the employee. And while in the 80’s healthcare benefits were 2-3% of wages, today total benefits cost more than 25% of wages – with healthcare being the primary source of that increase. As a result there is a significant loss in real wages due to healthcare reform. Healthcare, in its traditional approach, is taking its toll on our communities and workforce.
For most for-profit companies, these changes in healthcare are a tough pill to swallow. But for nonprofit organizations it’s almost unmanageable. Faced with aggressively rising health insurance premiums and instability in the healthcare marketplace, the nonprofit community struggles to satisfy their budgetary needs and offer competitive health benefits to their employees. As a result, attracting and maintaining top talent becomes an impossible-to-solve puzzle. Something has to change - or we face the real possibility of fewer and fewer nonprofits serving our communities and filling the gaps left wide open by local, state, and federal governments.
In light of this, what healthcare options are on the table for the independent sector? As it stands, the three main approaches to group healthcare plans are: fully-insured; self-insured; and partially self-insured. Traditional fully-insured plans are expensive and cumbersome, and may slowly be going the way of the dinosaur. According to the Kaiser Family Foundation the percentage of U.S. workers covered by health plans that are at least partially self-funded (as opposed to fully-insured) by their employers has been rising gradually for many years, reaching 61% in 2014 compared with 44% in 1999.
The second option, self-insured coverage, is incredibly appealing. Self-funding all healthcare benefits can allow for greater customization and incredible savings. But for smaller organizations with limited funds, the financial risks are just too high. A catastrophic event could not only empty reserve funds but also exceed them. For nonprofits this risk becomes even greater because - while smaller for-profits often have excess money for some reserve funds - nonprofit organizations are usually fighting for every penny.
But there is a middle ground with partially self-funded healthcare. While most of the business world is focused on either option A (fully insured) or option B (self insured), option C is quietly gaining ground as a viable – and ACA compliant - choice for smaller organizations who want the same benefits and savings as large companies.
As background, a partially self-insured plan builds on already existing group health insurance. Organizations purchase less expensive, high-deductible coverage plans for employees, and then provide supplementary funds in the form of an employee-reimbursement account for all workers (these supplementary funds go towards copays, deductible costs, and customized benefits that take into account the needs/wants of employees in the company). In this way, healthcare expenses are only partially self-insured, lowering the financial risk to the employer. The idea behind a partially self-insured plan is that companies can purchase group health insurance at a lower rate – anticipating that many high employee deductibles will never be met due to the percentage of staff with low health risks. As a result, a significant portion of those supplementary funds in the employee-reimbursement account won’t be spent and can be reinvested back into the organization.
That said, while partially self-funded healthcare sounds like a win-win, the downside is that it still requires underwriting to support the financial risk. This has continued to lead cash-strapped nonprofits away from pursuing it as a real possibility. But changes in the healthcare industry are driving true innovation from the entrepreneurial community. Creative new approaches are being designed to circumnavigate the way healthcare is traditionally provided, especially to the underdogs like nonprofits who are often left in the dust in comparison to their for-profit counterparts.
Nonstop is one of the companies revolutionizing the way organizations – nonprofits especially – access healthcare for their employees. Our mission is to support nonprofit growth by reducing the inflationary costs of healthcare, ultimately reducing overhead burdens. We do that through our Nonstop Wellness Plan, which includes underwriting the risk on partially self-insured employer-sponsored healthcare plans to nonprofits with over 50 members on healthcare (or about 35 employees plus spouses and dependents). This saves nonprofits an average of 12.5% annually and enables them to provide significantly better benefits to their employees - without any risk at all. This reduction in overhead can be a game-changer for budgets and programming, as well as provides incredible opportunities for competitive benefits packages to attract and retain high-quality staff. The Nonstop Wellness Plan is absolutely unique in the healthcare industry and totally designed to meet the needs of the independent sector.
With ever-inflating healthcare costs and a rapidly changing industry landscape due to the ACA, its easy to see how overwhelming the whole process can be to almost any organization – let alone nonprofits who are constantly having to evolve just to stay afloat. Figuring out how to offer the best healthcare options for both employees and the bottom line can be exhausting and intimidating, especially when there are so few systems in place to help these organizations navigate this new world of healthcare. As a community, our job isn’t to just sit back while these organizations struggle – and possibly fail – but rather to find ways to support them. At Nonstop we recognize the challenges faced by nonprofits, and provide guaranteed savings and a strong, consistent, one-stop healthcare solution to ensure they are able to remain competitive and relevant in today’s world.
Danielle Ledford is a healthcare broker for Nonstop. She can be reached at [email protected].