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Top Reasons to Self-Fund a Group Benefits Plan

Millions of Americans rely on employer plans for their health care benefits. But, as insurance rates continue to rise for employers, the increased financial burden has many looking for more affordable ways to provide employees and their families with quality coverage.

If you have clients who are willing to assume some or all of the financial risk for providing health care coverage, the cost savings through self-funding can be significant. We’ve put together a list of reasons why self-funding may be a better choice than a fully-insured plan.

 

  • Lower fixed costs. Administrative fees of a professional TPA are lower than those of large insurance companies.
 
  • Improve cash flow. In fully insured arrangements, the carrier retains reserves to cover potential future expenses. Self-funding allows you to retain funds until needed, which can create additional revenue for the employer in the form of interest.
 
  • Allow control over plan design. You can redesign benefits at any time to address the changing needs of the plan and its participants.
 
  • Eliminate mandatory state-regulated benefits. Since most self-funded plans are subject to the Employee Retirement Income Security Act (ERISA), they are not required to include state mandates.
 
  • Reduce premium taxes. You do not pay taxes—of up to 5%—on your claims fund. Since claims represent about 75-80% of total plan costs, this savings can be significant.
 
  • Eliminate carrier profit margin and risk charge for the bulk of the plan. These charges would only occur in any stop loss insurance purchased for the plan.

 

  • Allow flexibility in value-added programs. Self-funded programs have choices in network partners, utilization management, large case management, subrogation, hospital bill audit programs, and other programs for a full complement of plan-appropriate partners.
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How can we help you?

We’re here to make your job easier. If you have clients who can benefit from making the move to a self-funded plan, HNAS has the tools and resources to help you begin the conversation. 

 

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