Benefits of Self-Funding
Here are some benefits of self-funding:
Employers have more control over their health benefit program.
Increased Financial Control:
Self-funding eliminates insurer profit margin and puts cost control in the employer's hands rather than the insurance company's.
Lower Operating Costs:
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.
These are included in an insured premium on top of the costs of expected claims, which can range from 10 to 30%.
Plan design flexibility and ongoing 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.
Self-funding allows employers to design a health benefit plan to address specific employee needs, as well as company objectives. Self-funded plans are regulated by ERISA, which exempts plans from state insurance laws that typically mandate certain benefits for insured plans and allows uniformity across state lines for multi-state employers.