THE ADVANTAGES OF SELF FUNDING

Employers choosing to self-fund their health plans have the following advantages:

Self-funded plans sometimes have lower administrative costs and employers pay claims as they occur. This avoids Insurance company profit margins and can allow companies to have more control over costs. Employers often find that administrative costs for a self-funded plan through a third party administrator (TPA) are lower than those being charged by a carrier under a fully-insured program.

Self-funded employers are afforded more flexibility in the design of their benefit plans. This helps to control of cost, quality and levels of service for each component of their plan.

Decision making on what to include and how to adjust spending on certain aspects of the benefit plan can be directly determined by data received from utilization reports and claim information.

Self-funded plans incur lower taxes than other health plans and many of the provisions of health care reform do not apply to self-funded plans.  Working with wellness programs helps employers to see their efforts come to fruition in the form of dollars saved. Funds usually held by the insurance carrier in various reserves are available for use by self-funded employers. The employer controls the reserve if the claims expense is less than expected the employer benefits financially.  However, the group must be of an acceptable size to take this approach as they will also be assuming some of the risk of claims occurring.  We have found the optimum size for self-funding is around 100 employees.  There are TPA’s and stop loss carriers willing to work with employees on a level funding plan for smaller employers but we always remind our groups there is a little more financial risk.  By choosing the right broker,  employers offering self-funded health plans take advantage of cost savings, increased cash flow, flexible benefit decisions, as well as choice in administration and how to invest their funding; not to mention the cost savings incurred by being exempt from several provisions of health care reform.   Maybank and Beckham, LLC have years of experience working and designing self- funded plans.   For our current clients we always shop self-funding to see if this is a cost saving option.