Control of Plan Design
You have total flexibility in plan design.
Reduction of Premium Tax
Fully-insured plans are subject to premium taxes, but in most states,
there is no premium tax for the self-funded claim.
Elimination of State Mandated Benefits
Benefit plan is governed by ERISA rather than state.
Cash Flow Benefit
Money formerly held by the insurance carrier in the form of reserves,
such as unreported claims and pending claims, is available to you.
Administration Tailored to Your Needs
As a self-funded employer, you assume the responsibility to provide
the administrative functions of the plan—utilization review,
claims adjudication, claims auditing, and reports. A third-party
administrator is usually selected to provide these administrative
No Paperwork or Claim Form
Physician/hospital bills the TPA directly without participant submitting
a claim form.
Reduced Operating Costs
Administrative costs for a self-funded program are often lower than
those being charged by insurance carriers on a fully-insured basis.
Carrier Profit Margin and Risk Charge
The dollars spent are on your health care expenditures, without
additional charges from a fully-insured company.
Effective Claims Processing
Detailed paid claims information and analysis for a self-funded
employer is provided.
Cost and Utilization Controls
Flexibility to cover as much or as little medical management to
suit you company’s needs.
When you decide to self-fund, in essence, you become an insurance
company and must be willing and able financially to assume the risk
that is normally carried by an insurance company. Adequate cash flow
is essential to cover both large claims when they occur and to continue
to pay excess claims until the stop-loss carrier reimburses you.
Understanding Health Care Issues
Technology, demographics, government intervention, medical trends,
and rising costs can affect health care plans. When a plan is self-funded,
it is important to become more familiar than you normally would with
these health care issues and learn how to deal effectively with changes
in the health care environment.
When a plan is self-funded, excellent communications with employees
on the terms and conditions of the plan, as well as managing their
benefits and costs, is very important.
If you elect to go back to fully-insured, your firm will be responsible
for run-out claims and the fully-insured premiums for the new fully-insured
plan. This can also cause cash-flow problems.