Advantages of Self Funded Health Insurance
Reform loopholes, lower costs, greater flexibility and access to information are just a few reasons self funding health care plans are an attractive alternative to a fully insured plan:
Self funded health insurance plans are exempt from many PPACA requirements. Download our Loopholes in Reform for Self Funded Health Insurance white paper.
Increased Financial Control
Most employers with self funded plans fund claims as they come due rather than funding them through advance premium payments, which means that you are investing your money instead of an insurance company.
By funding claims directly, an employer avoids the costs of claim reserves, retention to cover the insurance company’s administrative costs, profit margin, risk charges, premium taxes, and a contingency margin, which are included in an insured premium on top of the costs of expected claims. Reserves and retention charges can range from 10% to 30%.
Self funding allows employers to design a health benefit plan to address specific employee needs, as well as company objectives. Self funded plans are also exempt from state insurance laws that typically mandate certain benefits for insured plans.
Plan design flexibility and on-going analysis of plan expenses allow self funded employers to make the plan design changes needed to manage costs. Self-funded plan designs can include strategies to monitor utilization, steer care to discounted provider arrangements, and assure appropriateness of care, all of which encourage wellness and provide incentives for wise utilization of care. Third Party Administrators (TPA)s supply employers with the information and analytics needed to make these decisions. Expectations of Third Party Administrators.
Self funding allows employers to design a health insurance plan that addresses specific employee needs, as well as company objectives. Self funded plans are also exempt from state insurance laws that typically mandate certain benefits for insured plans.