Since 1999, the number of employees covered under a self-funded plan has increased: In 1999, the percentage of employees covered by a self-funded plan was 44%, and by 2015, that number increased to 63%.

With the rise of self-funding, you may have seen various articles written on the topic and generally heard the term more frequently. But what is it? Here are the basics to get you in-the-know.

A self-funded group health plan, also known as a self-insured group health plan, means that the employer assumes the financial risk for providing health care benefits to its employees. To put it another way, self-funded plans are more of a “pay-as-you-go,” as opposed to the fixed premium that you would pay with fully-insured health plans. Self-funded health plans are best accompanied with stop-loss insurance, which essentially protects the employer from assuming sole liability of excessive or unexpected claims.

There are many potential benefits and advantages of self-funding group health plans, including:

  • Customizable plan design
  • Lower taxes
  • Greater claims data access
  • Customizable wellness and health management programs
  • Not subject to many state mandates
  • Additional cash flow
  • Savings on administration costs
  • Greater transparency

Typically, self-funding has been thought to be a viable option only for large companies who have the cash flow or financial resources needed to cover claims themselves. However, the reality is that self-funding with the proper protections in place, such as stop-loss insurance, can be advantageous for most companies above 100 employees. According to the U.S. Department of Health and Human Services, “About 26% of employers with between 100 and 499 employees self-insure (for employers with 500+ employees that number is 82%).”

Each company is unique, and therefore has different needs as far as funding options go. There are many factors to consider when exploring funding options or possibly transitioning to self-funding. The safest way to decide if self-funding is the best option for your company is to speak with a broker who specializes in self-funding (we might have somebody in mind!).





Sources:
1. http://www.hcaa.org/page/selffunding
2. http://www.benefitspro.com/2015/03/09/the-rise-of-self-funding
3. Kaiser/HRET’s Survey of Employer Sponsored Health Benefits, 1999–2015