The Benefits | Self Fund It

The primary reason employers choose to self-fund is to gain greater control over the cost expenditures associated with employee benefits. Although no cost savings are guaranteed, there are several areas where employers can expect to reduce expenses.

Enhanced Cash Flow: Employer dollars previously held in the form of unreported or pending claim reserves by the insurance carrier are available to the employer for other uses.

Control Over Benefit Dollars: The employer knows where health plan funds are going and what they’re used for. If medical claims for a plan year do not exceed a predetermined limit, the employer keeps those dollars and they can be used to offset the following year’s expenses or reduce contribution levels for the employer or employees.

Return on Investment for Reserves: The employer receives interest from the reserve account established by the TPA.

Reduced Operational Costs: Employers usually find that overall administrative costs for a self-funded program incurred through a professional TPA are lower than costs charged by their previous insurance carrier.

Elimination of Most Premium Tax: There is no premium tax for the self-funded claim fund which immediately results in cost savings for the plan.

Carrier Profit Margin and Risk Charge Advantageous: The insurance carrier’s profit margin and risk charge are eliminated for most of the plan.

Cost & Utilization Controls: Rather than being restricted to an insurance company’s limited in-house programs, a variety of cost control programs may be available to the employer including: access to a choice of preferred provider organizations (PPOs), large case management, second surgical opinion, outpatient surgical, and hospital bill audit programs.

Cost-effective Claim Processing: A TPA’s success depends upon providing accurate and efficient claim processing for each employer.

Control of Plan Design: The employer maintains control of the plan design, which includes making necessary plan changes to control abuses.

Improved Financial Reporting: The TPA will analyze and collect data from the employer’s plan for greatly improved experience reporting.

Risk Management through Stop Loss Coverage: The employer selects the amount of retained risk and the amount of risk to be covered by the Stop Loss coverage. A fully-insured carrier typically has set pooling levels that allow little flexibility.

Extra Costs for State Benefit Mandates Avoided: Self-funded plans are subject to ERISA, which is regulated by the Federal Government , not State laws and regulations that require health insurance plans to provide various benefits or to follow other administrative requirements.