The benefits of self-funding
With healthcare reform changes currently taking place, and many others that are rapidly approaching, a number of employers have started looking into the self-funded route. Here’s why:
- Self-funded employers can eliminate the risk charge that medical carriers assess.
- State premium taxes reduce because, unlike insurance policies, employers who self-fund are not subject to those same taxes.
- ERISA self-funded plans are exempt from state insurance laws, giving them more flexibility.
- Benefit plan changes are simple because employers can instruct their third-party administrator (TPA) to revise benefits instead of negotiating with a carrier on changes and associated costs.
- The employer can use their TPA’s contracts with various provider networks to determine which are best suited to meet the healthcare needs of its employees.
- Cash flow advantages occur, typically during the year of adoption, when run-out claims are still paid by the previous insurer. Plus, the employer has control over their reserves, maximizing interest income, which is otherwise typically generated and invested by the insurance carrier.
- Stop-loss insurance can be purchased to protect employers from large claim amounts.
TPAs can offer many advantages for employers, such as administration of high-deductible health plans and other cost-containment strategies for benefit plans like plan management analysis, disease management and wellness programs, overpayment recovery and fraud protection, and dependent audits.
Learn more about self-funding
Check out information from CoreSource, a national leader of self-funded services for groups of 100 or more, a profitable division of our partner, Trustmark.