Self-employed people enjoy a level of freedom that just isn’t possible through conventional employment. For many of them, returning to conventional employment after tasting self-employment freedom is not an option. But everything about self-employment isn’t sunshine and roses. Take health insurance. It is a big problem for the self-employed.
Self-employed individuals cannot access the same group policies available to larger employers. If they have fewer than 50 employees, their options for affordable health insurance are limited. And when a self-employed person works alone, the only option is purchasing health insurance in the individual market. But the individual market is awfully expensive.
The long and short of it is that the self-employed need a real health insurance alternative. Health insurance obtained through federal exchanges is not the answer. But there is a viable option in self-funded health plans.
Self-Funding Basics
StarMed Benefits is a Las Vegas company whose business is acting as a third-party administrator for self-funded health plans. The company explains that a self-funded health plan is a plan that is funded by the employer rather than an insurance company. A combination of payroll deductions and employee contributions funds a separate account through which healthcare expenses are covered.
StarMed further explains that employers choosing the self-funded model often protect themselves against financial loss by purchasing stop-loss insurance. The extra insurance pays out when an employer underestimates healthcare costs for the coming year.
Self-Funding for the Self-Employed
Self-funding a health plan is doable regardless of the number of employees a self-employed individual has working for him. Whether it is a home remodeling contractor with two helpers or an ecommerce operator with a team of 25, self-funding offers the smallest of employers all the same advantages it offers the largest corporations.
Self-funding might seem like overkill for a self-employed individual working as a sole proprietor. As his only employee, the sole proprietor ends up paying for all his healthcare out-of-pocket anyway. So, what’s the point of establishing a self-funded health plan?
Self-funding gives sole proprietors access to group rates by putting them all together in a single group. As a result, health coverage suddenly becomes affordable to a sole proprietor who could not foot the bill for a health insurance policy purchased on the individual market.
Greater Flexibility, More Choice
It is no secret that self-funded health plans are usually less expensive than conventional health insurance. How do plan sponsors manage it? Through greater flexibility and more choice. When a company self-funds, it controls nearly every aspect of its health plan.
Self-funded plans do have to offer minimal essential coverage (MEC) in order to maintain Affordable Care Act (ACA) compliance. But MEC can be achieved without busting the budget. In addition, self-funding employers have more flexibility in determining how they will offer MEC.
By contrast, insurance companies tend to offer one-size-fits-all policies. You end up with health insurance plans that often provide coverage employees do not need. Meanwhile, they don’t cover genuine needs adequately enough. Conventional health insurance just doesn’t offer the flexibility and choice you get with self-funding.
Individual Costs Will Vary
While it is possible for the self-employed to get affordable health plans through self-funding, individual costs will vary. Business owners typically work through insurance brokers or third-party administrators to establish plans based on workforce needs. From there, employers can administer the plans themselves or leave the task to their brokers or third-party administrators.
Self-funding is a lower-cost alternative to traditional health insurance. It is the real alternative self-employed people are so desperate for. If you are self-employed and cannot afford insurance on the individual market, consider a self-funded plan.
