SELF FUNDED HEALTH INSURANCE
A growing number of businesses are discovering that a self funded health insurance plan can be a cost-effective alternative to the traditional fully-insured approach.
WHAT IS SELF-FUNDING?
In a self-funded or “self-insured” health plan, the business accepts responsibility for the risk of health care for enrollees, who are typically employees and family members. The business self-funds the plan rather than paying a premium to a commercial insurer. The benefits of self-funding include increased financial control and lower operating costs.
What are the Top Five Benefits of Self-Funding Your Employees Health Insurance?
Businesses and other organizations that self-fund health benefits gain advantages in at least five areas:
- Increased Financial Control. Self-funding eliminates insurer profit margin and gives cost control options to the business, rather than the insurance company.
- Lower Operating Costs. Funding claims directly allows an organization to avoid a long list of costs: claim reserves, retention to cover the insurance company’s administrative costs, profit margin, risk charges, premium taxes and a contingency margin. In a fully-insured plan, these costs are all charged to the business in addition to the cost for expected claims and can make up 10 to 30 percent of the total cost to the business.
- Cost Management. Self-funded businesses gain the flexibility to modify the plan design to manage costs. These efforts can be monitored and refined through an ongoing analysis of plan expenses. A self-funded plan design might include strategies to monitor utilization; steer care to specific providers for greater savings; or reduce unnecessary care. These strategies can be tied to employee well-being programs for greater impact.
- Flexibility. Self-funding allows businesses and organizations to design a health benefit plan to address specific employee needs, as well as company objectives. Self-funded plans are governed by federal ERISA rules, which exempt plans from state insurance laws that often mandate benefit levels. This also makes it possible for employers with sites in multiple states to offer a uniform plan.
- Access to Data. In a fully-insured model, the insurance company owns the data. In a self-funded plan, the business or organization that provides the health plan owns the data and can use it for analysis and benchmarking. That enables self-funded businesses to quickly spot trends and drill into data to gain actionable insights. Data reports are typically generated by a network partner, like The Alliance, or by a third-party administrator (TPA).
Learn more about Self-Funding from our FREE white papers
- About The Alliance
- The Advantages of Self-Funded Health Insurance
- When You’re Considering Self-Funding
- Benefit Briefing: Insights on Employer Benefits (E-Book)
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Is Self-Funding Right for You?
Answering 10 questions can help you decide. Read the Wisconsin Business Voice article written by Cheryl DeMars, president & CEO, The Alliance.
Who Can Self-Fund?
Self-funding is an option for businesses, municipalities, school districts, unions, Taft-Hartley insurance trusts and other organizations. Get a picture of what self-funding means – and who is using it — with our infographic. Businesses in a wide variety of industries can benefit from self-funding. The larger the employer, the more likely it is that they will self-fund.