Employer Self-funded or "self insured" healthcare programs are often preferred over fully insured programs by many employers because self funding offers portability, optimal flexibility and greater customization of stop-loss strategy, healthcare plan design and plan administration, reduce premium tax and commissions, and provide the greatest level of transparency in knowing the true costs of healthcare plan administration.  In addition, cost savings resulting from favorable claims experience stay in plan reserves, unlike fully insured programs where premiums are an unrecoverable cost.

With employer self-funded or "self insurance" plans, group administrators can design efficient and effective benefit programs that fit their budget and their employee needs. This is exceptionally beneficial when an employer has multiple locations in several states. Self-funding plans offer a high level of flexibility and customization, allowing groups to select from an array of benefit plan configurations and administration options. Other customizable choices include:

  • Effective provider network solutions based on employee residence and availability of primary care providers and specialists
  • Wellness programs and Disease Management programs that improve employee health while managing healthcare cost and level of care necessary for treatment
  • Catastrophic intervention programs to manage chronic and severe cases requiring aggressive treatment programs
  • Pharmacy benefit options including formulary prescriptions and mail order options
  • Stop-loss plans based on risk tolerance

Self-insured plans are regulated by ERISA (Employee Retirement Income Security Act of 1974) and are exempt from most laws regulating fully-insured plans on the state level. Self-insured healthcare plans pay premium taxes and commissions on stop-loss premiums only, resulting in lower overall employer healthcare program costs. Profit margins and risk charges, typically associated with insurance carriers, are eliminated from the self funded  plan. Other economic advantages include increased cash flow, interest income on claims reserves and gains from cost containment efforts.

Self-insured plans provide the greatest level of transparency by providing the group monthly, quarterly and annual recaps of all costs associated with their plans including administration, savings from cost management programs and premium and commission costs. This gives plan administrators and decision makers the critical information they need to customize their plans for maximum effectiveness.

While fully-insured plans offer set premium costs and protect the group from large claim exposure, stop-loss insurance can provide similar protection for self-insured plans. By selecting an amount of insurance based on a company’s risk tolerance (on a specific and/or aggregate basis), stop-loss plans can offer the same level of protection.

For employers who want to reduce healthcare spending by developing customized plans with appropriate Wellness and Disease Management programs, self-funding can be an excellent solution. By understanding the drivers of cost increases, companies can explore and implement options to their healthcare programs that will result in reducing the trend of rising healthcare premiums.