What is Self-Funding Health Insurance...
Why should you consider Self-Funding?
Self-Funding: The Difference As a company, when you self-fund, you have greater control of your healthcare plan. Think of it as the difference between renting an apartment versus owning a home. As a renter, you are at the mercy of the landlord for rent increases, repairs, and you are stuck with white walls. This is just like a fully insured health plan: all of your costs are determined by the carrier and the plan options are limited. Self-funded health plans are like owning a home, giving you greater control, flexibility, and choice.
Top Reasons to Self Fund:
1. Eliminate Most Taxes: There are no state premium taxes on a self-funded plan. Premium tax is only applied to the stop-loss premium, which is significantly less than a fully insured plan. Additionally, self-funded plans are exempt from the health insurance industry fee required by the ACA.
2. Lower Administration Costs: Administrative costs are significantly lower than those charged by an insurance carrier.
3. Carrier Profit Margin and Risk Charge Eliminated
4. Effective Claim Management: Transparent, timely, and accurate claims processing exceeds industry standards, saving you money.
5. Preventive Care Initiatives Yield Direct Savings: By using dynamic claim management tools, you can identify high cost claims categories and tailor preventive care initiatives to target the source of high dollar claims.
Stop Loss Insurance
The Role of Specific & Aggregate Stop-Loss Protection Almost all self-funded plans contain a stop-loss insurance component to cover major plan liabilities above a specified dollar amount. Stop-loss insurance is designed to protect our clients from catastrophic claims for conditions such as cancer and organ transplants, or unexpected increases in overall utilization. The two types of stop-loss coverage are:
Individual Stop Loss (ISL): Individual stop-loss protects the employer against catastrophic claims by single individuals that exceed a dollar limit chosen by the employer. For example, if a covered participant incurs catastrophic injuries in an accident and has claims exceeding the contract’s agreed upon dollar limit (deductible), the ISL coverage would reimburse the employer for the covered expense beyond that dollar limit.
Aggregate Stop Loss (ASL): Aggregate stop-loss insures against non-catastrophic claims exceeding a total dollar amount for a plan year. This is usually 125% of the level of expected claims established by the carrier.
As you become more comfortable with self-funding, you will be able to take on more appropriate catastrophic thresholds. This will result in a decrease in aggregate premiums over time.
Myth #1 - Only Large Companies Benefit From Self-Funding Most growth in self-funding has been in companies with fewer than 200 employees, some as few as 50. The economic advantages can still be realized by tailoring individual and aggregate stop loss insurance using historical claims data. In addition, smaller companies have the flexibility to design wellness programs that impact their high dollar claims expenses.
Myth #2 - One Large Claim Could Expose Our Company to Greater Financial Risk You can protect yourself from the financial risk of a catastrophic medical claim by purchasing the appropriate level of individual stop loss insurance. The amount of risk assumed is entirely up to you and levels are determined by your company size, demographics, and claim history.
Myth #3 – Self-Funding Will Create More Work Our self-funded administrators have a knowledgeable and experienced staff who will handle every aspect of your benefits package to include: plan administration, day to day claims processing and member service. Their timely reports and consolidated billing keep you informed while allowing you to focus on building your business.
Myth #4 - Only Large Insurance Carriers Have Large Provider Networks The carriers we represent work with several national, regional and state PPO networks which will provide your employees with access to the quality healthcare choices they need and deserve. In fact, you will have a greater choice in networks than is offered by a one size fits all pre-packaged plan.
Consider moving to Self Funding.