Considering Self-Funding Your Benefit Plan?
Why should you be Self-Funded?
According to a 2000 report by the Employee Benefit Research Institute (EBRI), approximately 50 million workers and their dependents receive benefits through self-insured group health plans sponsored by their employers. This represents 33% of the 150 million total participants in private employment-based plans nationwide.
The advantages of self-funding are numerous and valuable:
State mandated benefits might be excluded. Examples include minimum coverage requirements on specific benefits such as TMJ, alcoholism, mental illness, etc.
Investment gains can be made from plan reserves. Your benefit dollars remain in your account until benefits are actually paid, thus allowing you to maximize investment income
Pre-payment for coverage is not required, as it is for insured plans…again, the cash stays in your account until benefit payments are made
Valuable reduction in state taxes on plan premiums. Typically state taxes on plan premiums are 3% …this translates into direct savings for your company
Administrative expenses for fully insured plans are usually much higher than for self-funded…again, this translates into savings for you
Insurance company profit is not part of your employee health benefit cost. You pay for benefits used
Avoid adverse risk charges: Only your claims experience will determine your reserves…poor experience from other groups will not impact your plan
Customize your plan to meet your company’s specific needs, including reinsurance levels and the amount of risk your organization is willing to take