SMBs Revolutionize Health Plans with Alternative Funding

In a rapidly changing landscape, small to midsize businesses (SMBs) are stepping away from traditional models and embracing innovative solutions for their health plans. With the rise in healthcare costs and a growing disillusionment with fully-insured plans, SMBs are turning towards alternative funding mechanisms such as captives, artificial intelligence, and third-party administrators (TPAs) for more transparency and control.

The Rise of MSL Captives

The adoption of medical stop-loss (MSL) captives is on the ascent. SMBs are finding value in MSL captives’ ability to provide financial protection and potentially return unused premium surpluses, as they anticipate a 7% to 8% rise in healthcare costs this year. This collective approach not only stabilizes costs but also empowers businesses to manage risks effectively.

Moving Away from Fully-Insured Plans

A mass exodus is underway as SMBs abandon overpriced, fully-insured plans in favor of self-funding. The shift affords them increased transparency and cost savings, as they tailor their plans to better fit their financial and healthcare needs. SMBs are learning they can shape how much risk to retain, moving them away from the restrictive nature of fixed premiums.

Managing Adverse Risk with Intelligent Captives

Not all captives are created equal, and many exacerbate adverse risk retention. However, progressive captives are efficiently tackling this challenge by incentivizing accountability with favorable terms. By rewarding good risk and filtering out unmanaged risks, these captives are reshaping the insurance landscape and gaining traction.

AI-Driven Solutions Transform the Market

AI is making significant waves in the insurance industry, particularly with app-less level-funded products. Despite the higher request-for-proposal (RFP) workload, the adoption of AI for underwriting promises streamlined processes. As carrier capacity grows, these products will become more accessible, transforming the funding approach for SMBs.

The Emergence of TPA 2.0

In light of recent lawsuits involving health benefits mismanagement, a new breed of TPAs is coming to fore. These tech-enabled administrators offer SMBs substantial savings and transparency by managing claims directly within cash-price based networks. This evolution, labeled TPA 2.0, encourages SMBs to take back control and ensures lower healthcare costs for employees.

With these shifts underway, SMBs are poised to redefine the health insurance paradigm, leaving outdated models behind. As stated in Employee Benefit News, the movement toward alternative funding is not just a trend, but a revolution that’s just beginning.

Stay tuned for part two, where we’ll explore additional innovations paving the way for a new era in healthcare funding for SMBs.