Self Funding
Is Self Funding right for you?
Self funding is an effective method for taking control of health care expenditures and creating financial and operational efficiencies that benefit both the employer and its employees. These benefits require a long-term commitment which requires a sound understanding of both the advantages and potential disadvantages of self funding.
Contact Merchants Benefit Administration, Inc. to see if SELF FUNDING is a good fit for your organization. Contact Us
Advantages
- Overall Control
Complete flexibility of plan design, funding and reserve margins
- Monetary
Money previously held in the form of reserves, incurred claims and reserve/claims profit margin is held in your accounts and earns interest for you.
- Reduction of Premium Tax
Self-funded plans are not subject to the premium taxes fully-insured plans pay.
- Elimination of State Mandated Benefits
State mandates are not enforced as plan is governed solely by ERISA.
- Administrative Efficiencies
By utilizing a Third Party Administrator, eligibility, billing, claims payment and claims resolution is streamlined through one location. Client satisfaction is increased and plan performance is maximized.
- Reduced Operating Costs
Administrative fees incurred by TPAs are often lower than in fully-insured arrangements.
- Reporting
Accurate, detailed claims utilization reporting and analysis is available to self-funded plans that is not readily available to their fully-insured counterparts.
- Cost and Utilization Controls
The plan dictates how much or little medical management to incur within the plan.
Disadvantages
- Financial Risk
Sometimes self funding is a lower cost option, but the employer assumes the risk for paying claims between the expected claim level and the Stop Loss coverage instead of an insurance carrier absorbing the costs.
- Increased Employer Education
A successful self-funded plan requires continual health care education for the employers. Keeping updated on medical trends, claims analysis and employee communication is critical to ensuring the maximum benefit from self funding.
- Decreasing Population
If an employer incurs a large downward swing in enrollment, the concurrent claims lag. Decreased premium and census change can cause cash flow issues as well as jeopardize reinsurance contracts.
- Return to Fully-Insured
In the period a plan sponsor returns to being fully insured, it is responsible to fund both run-out claims as well as the fully-insured premium. This can cause a double-expense effect in the first few months of the new plan.