Benefit 
Health Advisor
 

Self Funding 


Partially self-funded medical plans are established to gain better control over providing medical benefits to employees. By self-funding a plan, the employer takes financial responsibility for paying the medical claims of members. This allows the company to gain control over expenses and realize savings due to lower claims volume, lower taxes, and lower overhead costs. A properly managed self-funded benefits plan can benefit your organization in many ways. The following are benefits to unbundling a medical plan:


  • Greater Flexibility
  • Customized Benefits
  • Reduced Cost
  • Plan Stability
  • Better Quality


Learn more about Self-Funding:


The Prevalence of Self-Funding


Increasingly more employers are turning to partially self-funded health plans each year. Self- Funding is one of the most effective ways employers can control the rising costs of healthcare coverage. In order to better understand why so many employers have chosen this route, we've provided you with some key benefits that come as a result of the Self-Funded health plan model.


BENEFITS OF SELF-FUNDING


Claim Corridor Savings: Fully-insured carriers set their rates based on the expected claims level of the group and add a “corridor” or a margin for error of 20 to 25% of the expected claims. Reinsurance carriers for self-funded plans also calculate a corridor but if the claim expenses do not reach that level, the employer keeps the unused claims funds.


Lower Premium Taxes: Each state charges premium taxes on insurance policies. Fully-insured plans pay taxes on the full amount of the premiums which includes all claim expenses and administration costs. Self-funded plans only pay taxes on the actual reinsurance premium, which is only a portion of the plan cost.


Lower Administrative Costs: Self-funded benefit plans have traditionally enjoyed lower administrative costs and overhead. The profit margin and risk charge of insurance carriers and administration companies are eliminated for the bulk of the plan. 


No State Mandated Benefits: Self-funded benefit plans are regulated by the federal government under the ERISA laws. Fully-insured plans are regulated by individual states. Self-funded plans gain administrative simplification from not needing to manage state-specific requirements.


Plan Stability: Self-funded plans reduce employee disruption that results from frequently changing insurance carriers to maintain competitive rates. Employers can maintain competitive pressures on rates and fees within the plan by bidding the reinsurance carrier each year. However, the claim administrator does not need to change, providing a consistent entity with which employees interact for claims and customer service. 


Control of Plan Design: The group has complete flexibility in determining the appropriate plan design to meet the needs of the employer and employees. The employer can also redesign its plan at any time.


Cost Reporting: Information is much more assessable when you have a self-funded plan. At Benefit Health Advisor, we provide quarterly reporting of costs, benchmarks, utilization, lag reports and more. Custom reports can also be generated and this information allows employers to further understand the needs of the employees and provide benefits more effectively.


Effective Provider Networks: We can offer an integrated program of PPO networks for multistate employers so that you have a network or multiple networks that are strong in each of the locations that you have employees.


Cash Flow: Cash Flow is improved when money formerly held by the insurance carrier in the form of reserves for unreported and pending claims is freed for use by the employer.