Self-Funded Or Fully Funded: Which Health Insurance Is Right For Your Small Business?

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Providing quality health coverage for employees is an arguably critical component in attracting top talent, especially in a competitive labor market.

But for many small business owners, the process can seem confusing and obtuse. It’s important to understand some fundamental options when it comes to choosing what’s best for your company.

The two principal models for providing healthcare are known as self-funded and fully funded. The latter is the traditional model in which the employer pays a fixed monthly premium to an insurer like Anthem Inc. ANTM or UnitedHealth Group Inc. UNH. All claims by employees are then handled entirely by the insurer.

In a self-funded plan, the employer assumes the risk of its employees. It does not owe monthly premiums, but it is responsible for all claims by its employees. The main advantage here is the potential savings for an employer with a healthy workforce.

Obviously, there is a higher risk here too, especially for businesses with sporadic cash flow. No one can predict the future and an employer could end up paying more if its employees make more claims than expected. Many companies opt for a fully-funded model for peace of mind.

However, employers can take actions to mitigate much of the risk and potential headaches assumed when choosing a self-funded plan.

Companies like Sana allow employers to choose what’s known as a level-funded plan, a variation of the self-funded model with some key differences. In this model, an employer pays a fixed premium but is then either reimbursed for what it doesn’t use or, more often, credited towards the following year’s premiums. These plans involve stop-loss insurance, which protects the employer from paying more than budgeted in the plan year.

Choosing a level-funded plan through a company like Sana may also simplify the claims process. Handling the administrative work of processing claims can be a preventative complication for many small businesses, so having a resource like Sana to handle it for you can result in big relief. 

All data surrounding employees’ claims are also owned by your company. In a fully funded model, that data is owned by the provider. Having access to this data could allow employers to better plan and predict costs and can enable better perspective – to see the big picture.

To learn more about Sana, check out

This post contains sponsored advertising content. This content is for informational purposes only and is not intended to be investing advice.

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