Having been in the insurance industry for over 25 years, collectively our agency specializes in “self funding.” It is with great pleasure that we welcome the resurgence of this funding instrument back to center stage.
Self funding gives the employers back the control — the control over both plan design and the financing of their health care benefit plan. While the employer assumes the risk of expected claims, you will purchase insurance (stop loss coverage, both specific and aggregate) to protect your plan against unpredictable or catastrophic claims.
The financial control is gained by paying for only the claims that your employees incur, when they incur them. In a fully insured environment you pay a monthly premium up front for what the insurance company believes your claims are going to be, advance premium payments. This also translates to the insurance company holding/investing your money.
By funding your own claims, you are also avoiding the costs of claim reserves as well as premium taxes. Included in these charges are the insurance company’s profit margins, risk charges, and their administrative fees. There will be administrative fees associated with your self funded plan but typically much lower than those of a fully insured plan.
The self-funded vehicle allows the employer to design the health benefit plan to meet their specific needs. It offers the flexibility to manage costs and make changes to better manage utilization and take advantage of discounts offered through third party vendors. All of which can help in the making of a much more cost effective plan.
We will be discussing the advantages of self funding in more detail in future blog posts. Should you have a questions please feel free to contact Sharon McReynolds at 214/739-5212 or email firstname.lastname@example.org.