Self-Funded Medical & Dental Insurance Programs
- Self-funding is an alternative approach to financing employee medical and dental plans. It allows employers (Plan Sponsors) to directly fund their actual claim costs, while limiting their risk with the purchase of stop-loss insurance.
- Stop-loss insurance protects a plan against individual catastrophic claims (specific stop-loss) or limits total claims exposure (aggregate stop-loss).
- More than 65% of Americans are covered by their employer’s self-funded health plan. With today’s self-funding products and stop-loss coverage options, self-funding is a viable alternative for employers of all sizes.
Advantages of Self-Funding
As the cost of health insurance continues to climb, employers are looking for alternatives:
- Self-funding offers employers a powerful, practical alternative to traditional insurance that allows them to reap the benefits of larger employers.
- Self-funding rewards employers for good claims experience in a way that makes sense for smaller businesses.
- Self-funding with stop-loss coverage protects employers from unusually high claims experience.
Cost Components of Fully-Insured vs. Self-Funded Health Plan
Fully Insured = The insurance company assumes all the risk.
Self-Funded = The employer assumes some of the risk.
Flexible Benefit Options
Employers have a wide variety of plan options to choose from:
- PPO Plans
- EPO (HMO like) Plans
- High Deductible Health Plans with an HRA or HSA
- Dual Plan Options
Employers can mix-and-match the benefit variables to meet their specific benefit plan objectives:
- Deductible Amount
- Co-insurance Percentage
- Out-of-Pocket Maximum
- Office Visit Co-payments
- Prescription Drug benefits
Benefits to Members
Lower healthcare costs:
- Discounted (10%) plan management fees
- Flexible plan design to avoid or limit state mandated benefits
- Reduction in taxes – no state premium tax (2-3%)
Other Benefits to Members:
- Excellent reporting capabilities
- Improved cash flow – no carrier claim reserve (IBNR) required
- More control in claims administration
- Consistent benefit plan communications
- ERISA plan vs. state insurance departments
- Improved service – eliminates bureaucracy