Self-Funding - General Information
Definition of a Self-Funded Insurance Plan
Type of plan usually present in larger companies where the employer itself collects premiums from enrollees and takes on the responsibility of paying employees’ and dependents’ medical claims. These employers can contract for insurance services such as enrollment, claims processing, and provider networks with a third party administrator, or they can be self-administered.
Source: www.HealthCare.Gov
The Reality…
Self funded programs are available for employers of most all sizes, and there are various funding mechanisms that can be utilized to create the most cost effective, administratively simple solution tailored to each employer’s specific needs. Whereas a fully insured program is more of a “cookie cutter” approach (ex. Anthem, United Healthcare, etc.), self funding truly offers employers a way to fully customize their benefit plan to create exactly what they need for their employees.
Self funded programs are governed by ERISA and typically not subject to state mandates, but do follow certain ACA (“Obamacare”) provisions. As such, employers are free to design their employee benefit plan as they see fit according to their needs. Further, as these plans are administered by a third party administrator (TPA), employers are also typically free to incorporate their choice of PPO vendor(s), Rx vendor, etc. as part of their program. This creates further customization of the plan to maximize savings, as well as tailor the program to exactly what is needed by the employer.
Self funding your healthcare expense, regardless of the funding vehicle, provides a much more competitive, long-term solution as compared to fully insured programs. Self funding provides you with various funding options, freedom to customize your plan as desired, unfettered access to your claims data, as well as improved customer service.
Self funding provides you with a way to maintain a competitive employee benefit program that will ensure both employee satisfaction, as well as a reasonable healthcare expense for the employer. Employees quickly realize they have a partner in their Third Party Administrator based on data available on their web portal, as well as direct access to customer service staff for questions. This may help alleviate some of the workload of the employer HR staff based on a redirection of questions to the TPA.
Self funding provides you with a means to recapture some of the savings in the “good years”. When fully insured, improved claims only benefit the carrier as any savings is simply retained by the carrier as profit. As a self funded group, the healthcare expense is treated as it should be: your money. If you have a good claims, you will have the opportunity to recoup some of these funds.
Self funding administration through your TPA creates a valuable relationship for employer management, HR staff, and the employees. The TPA is dedicated to ensuring the plan runs as smooth as possible, and plan members have a dedicated staff of TPA personnel to assist them will all aspects of plan management.