Self-Funded Plans FAQs
Self-funding or partially self-funding your company’s health benefits can be better for both you and your employees, letting you customize customer-specific plans to best suit your workforce – something we’ve been doing since 1995. As pioneers in the industry, our veteran team has earned a reputation as being the best in the business. And we’re out to prove it. Let’s take a closer look at self-funded health benefit plans and why they may be a better choice.
What’s the difference between self-funded and partially self-funded health insurance?
Self-funded insurance means an employer is funding their own health benefits with no stop-loss insurance purchased by the plan. A partially self-funded plan, on the other hand, means the employer has also purchased stop-loss protection to mitigate risks. Both forms of coverate engage a third-party administrator (TPA) to design and manage the plans. The TPA will handle everything from claims adjudication to employee portals to customer support for things like helping to file a claim or check account balances.
How much flexibility does self-funded insurance provide?
Plenty. Aside from allowing you to tailor your coverage to your employee base, taking financial control through self-funding, allows you to open up any portion of your program to competitive bidding. Shop the best rates for claims processing, pharmacy services, employee portal access, wellness offerings and more. Competitive bidding. With fully insured plans, the employer’s premium is paying for the plan components, such as claims processing, network access, disease management and pharmacy, all bundled together. Self-funded plans can be unbundled and each component purchased separately, allowing the employer to shop around for the component that best meets its needs and price point.
Does self-funding reduce the amount of government red tape?
Yes. One thing that makes health insurance expensive is the cost of complying with state regulations. State governments require fully-funded plans to cover a broad range of services which, in turn, requires the companies to factor those costs into their overall pricing. That means paying to fund coverage that your employees may not even need. Self-funded and partially self-funded plans aren’t subject to state mandates, which allows you to tailor your coverage to your company’s specific needs, eliminating the financial burden of a plan that is “marked up” based on a common denominator.
Who’s in financial control of my self-funded plan?
You are, the employer. With self-funded and partially self-funded plans the employer holds the purse strings and is therefore entitled to regular reports on where the money is going. Those reports allow you to know where your employees need the most financial backup, so you can better tailor your overall program to their needs.
What happens to the money my company sets aside for claims?
That money is yours. With self-funded and partially self-funded plans, the money set aside for paying claims remains an asset of your company, not a line-item expense. If your employees don’t use up what you have set aside, that money comes back to the company.
Are there tax savings with self-funded insurance plans?
Yes, there are. With a self-funded or partially self-funded healthcare plan, certain aspects of state and ACA (Affordable Care Act) taxes don’t apply. For instance, state insurance tax is typically paid only on the stop loss insurance portion of the employer’s cost. (Stop loss insurance is a product purchased by the employer to protect against the financial drain of catastrophic claims). Since that stop loss protection tends to be less than half the total plan, tax costs tend to be halved as well.
All of my employees are roughly the same age. How does self-funding help me?
With a self-funded or partially self-funded plan, your employees become their own demographic group, meaning that your plan doesn’t need to subsidize the needs of older or less healthy groups that a general-purpose, carrier-funded plan needs to account for.
TALK TO YOUR BROKER
Moving to self-funded or partially self-funded health insurance is easier than you think – when you choose the right partner.
Talk to your broker, then let us help build a custom plan that’s right for you and your business.
You can also call 800-290-1368 to speak to one of our benefit administration experts.