Self-Funded vs Fully Insured Health Plans: What Self-Funding Means for Employers
Self-funded health insurance is a type of health insurance plan in which the employer is responsible for paying for employee healthcare claims directly rather than paying premiums to an insurance carrier. The employer protects the plan through Stop-Loss insurance, such as a Captive pool or Individual and Aggregate insurance. The day-to-day operation of the plan can be handled by a third-party administrator (TPA), or as an Administrative Services Only (ASO) agreement with an insurance carrier. Compared to fully insured plans, self-funding gives employers more direct control over plan design and claim costs.
Key Benefits of Self-Funded Health Insurance for Employers
Control Over Costs
Employers have more control over their health insurance costs when they self-fund. They can choose the levels and types of coverage they want to offer employees. Additionally, funding can be set up to pay claims as presented or through a budgeted level-funded arrangement. Whatever is left at the end of the policy year remains with the employer instead of the insurance carrier.
Flexibility in Plan Design
Employers can design their self-funded health insurance plans to meet the specific needs of their employees. They can offer different levels of coverage, deductibles, and copays. This flexibility can help employers—especially mid-sized employers—attract and retain top talent.
Cost Advantages vs Fully Insured Coverage
Self-funded health plans eliminate the majority of State Premium Taxes. Plus, employers who self-fund eliminate the insurance carrier and their profit margins and risk fees, which can make self-funded plans more cost-effective than comparable fully insured options over time.
Self-Funded Health Plans for Mid-Sized Employers: Is Self-Funding Right for Your Company?
If you are an employer considering self-funded health insurance, carefully weigh the benefits and risks. There are a number of factors to consider, such as the size of your company, whether you are a mid-sized or larger employer, the number of employees you have, and the level of healthcare coverage you want to offer. Working with a consultant or broker specializing in self-funded health plans is a good idea. Your current insurance broker may not know the ins and outs of self-funding and how to find the right vendors for your program.
Why Work With Summit Administration Services as Your Self-Funded Health Plan TPA?
Summit Administration Services is an independent, privately held Third-Party Administrator. We can help you and your broker evaluate your options and make the best decision for your company. Summit operates on a fee-only, fully transparent business model, so we only make referrals based on what best fits an employer rather than how much money the vendor will pay us. Our experience with self-funded and partially self-funded plans helps mid-sized and larger employers navigate the move from fully insured to self-funded coverage with confidence.
Contact Summit Administration Services About Self-Funded Health Insurance
Contact Summit today at 888-690-2020 or email us at mktgdept@summit-inc.net to learn more about self-funded health insurance, how it compares to fully insured plans, and how it can benefit your company.
Related Resources on Self-Funded Plans
If you’d like a step-by-step look at how a self-funded health plan is built, visit Empower Your Benefits: A Short Guide to Setting Up a Self-Funded Health Plan. Tribal governments and enterprises can also review Empowering Tribal Organizations to learn how self-funding principles apply to workers’ compensation and Native American risk programs.
