Self-Funded Health Plans

Rather than paying fixed premiums to an insurance company—which, in turn, assumes the financial risk, employers have the option to pay for medical claims out of pocket as they are incurred.

Why do Employers Choose Self-Funding

An employer may choose to offer a self-funded health plan for a number of reasons.

  • Instead of trying to purchase a “one size fits all” health plan, self-funded plans can be customized to fit the needs of an employer’s workforce.
  • Employers with self-funded plans control the health plan cash reserves, allowing them to maximize interest income (insurance companies generate interest income for themselves by investing premium dollars).
  • Self-funded coverage is not prepaid, as it is when the employer pays premiums to an insurance company. Therefore, companies that self-fund their health plans have improved cash flow.
  • Self-funded plans are not subject to conflicting state health insurance regulations and benefits mandates. Instead, these plans are regulated by federal law.
  • Employers with self-funded plans are not subject to state health insurance premium taxes.
  • Employers can contract with the providers or a particular provider network that will best meet the needs of its employees.

What Is The Difference Between Fully Funded, Self-Funded, and Partially Funded Health Plans?

Fully funded plans are those that are offered for sale by an insurance carrier, who assumes all of the risks and pays all of the claims.

Self-funded plans are those wherein an employer assumes all insurable risk and pays claims (through a third party administrator). Please keep in mind with fully self- funded plans their is the risk of catastrophic claims.

What is common, and becoming more accessible for smaller employers, is partial self-funding. Partial funding uses an insurance carrier to limit the employer’s overall risk as well as limiting the risk on individual catastrophic claims. This is referred to as a stop loss.

Partially self-funded plans give employers control and flexibility that a fully insured plan cannot.

To help keep your health care costs down, do your best to be a wise health care consumer and always ask questions if you do not understand the benefits available to you. Contact us if you would like more information on our self-funded health plans.

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