Self-Funding Isn’t Just for Large Employers: How Small and Mid-Sized Businesses Can Benefit from Self-Funding

When it comes to employee health benefits, many employers believe self-funding is a strategy best suited for large corporations. Small and mid-sized businesses (SMBs) often assume they don’t have the infrastructure or capital necessary to self-fund their health insurance plans. However, the truth is that the size of a company does not determine its eligibility for self-funding.  

Self-funding can be a viable and cost-effective option for businesses of all sizes, including those with as few as 20 employees. If an organization has enough employees to aggregate claims data for confidentiality purposes, self-funding is a feasible option. Many types and sizes of organizations, such as unions, Taft-Hartley insurance trusts, municipalities, and school districts have successfully self-funded with The Alliance. We help SMBs leverage tailored strategies and partnerships to gain control over their healthcare expenses while offering competitive benefits that attract and retain top employees. 

The Benefits of Self-Funding for Small and Mid-Sized Businesses 

Self-funding offers a range of advantages that can significantly impact a company’s financial health and stability as well as employee well-being and satisfaction. Here are some of the key benefits: 

1. Customization 

Unlike traditional insurance models that have one-size-fits-all policies, self-funding allows businesses to design customized health plans that meet the specific needs of their workforce. This flexibility means employers can offer more effective benefits, leading to increased overall employee health and engagement. 

Self-funding also allows employers to customize their provider network, enabling them to choose networks that best fit their employees’ needs and geographic locations. The Alliance offers various network options ranging from the most coverage (The Comprehensive Network) to the most customization (The Premier Networks). These network options allow businesses to select from over 39,000 providers across the Midwest. Benefit design strategies like steering and tiering can drive further savings by encouraging employees to seek care from providers who offer good care at lower costs.  

Beyond the provider network, The Alliance allows employers to work with whichever benefit vendors they choose. While traditional commercial insurance models often require employers to work with specific vendors, working with The Alliance gives employers the freedom to choose vendors that align with their organizational goals and values. Having the ability to choose the vendors an employer is comfortable with encourages innovative benefit design. This not only enhances the benefits employers can provide, but it also fosters a more engaged and loyal workforce.  

You can read more about how to choose the right benefit partners for your benefit plan here.  

2. Access to Claims Data

Self-funding provides employers with unparalleled access to their claims data, offering insights that are not possible with traditional insurance models. This access empowers businesses to analyze their plan participants’ healthcare spending patterns, identify areas for cost reduction, and make informed benefit plan design decisions that improve their health plans. For example, if a company notices a high concentration of claims related to a specific health condition, it can implement targeted interventions to guide employees toward cost-effective, high-quality care. They can also implement targeted education programs or wellness incentives.  

The Alliance helps its employer-members understand their claims data with Smarter Health^SM analysis, a customized analytics report that digs deep into claims data to uncover potential savings opportunities. By leveraging this data, employers can design health benefit plans that truly align with their employees’ needs and direct them toward high-value care.

3. Cost Savings and Improved Cash Flow

One of the most compelling reasons for SMBs to consider self-funding is the potential for cost savings.  

By self-funding, employers pay only for the healthcare services their employees use, rather than a fixed premium to a commercial insurer. This model can lead to significant savings for smaller employers, especially those with a healthy workforce. 

Small and mid-sized employers can enjoy improved cash flow with self-funding as they do not need to pay a large premium upfront. This allows them to allocate resources more efficiently and have more control over their plan reserves, potentially increasing the amount of interest earned on these funds. Additionally, self-funded plans are not subject to state health insurance premium taxes, which can further reduce costs. 

Partnering with The Alliance: A Path to Success 

The Alliance is a trusted partner for over 425 self-funded employers. We have been providing access to high-quality healthcare solutions for over thirty years. Small and mid-sized businesses that self-fund with The Alliance can tap into a wealth of resources, including our comprehensive provider networks, advanced data analytics, and strategic vendor partnerships. They also gain access to greater flexibility, control, and financial stability helping them offer competitive, comprehensive health benefits.  

In today’s dynamic healthcare landscape, effective health benefits are more important than ever. If you’re ready to explore how self-funding with The Alliance can transform your business’s health benefit strategy, schedule an appointment with me.