The Basics of Self-Funding
Fully Insured vs. Self-Funded
In a traditional fully insured health plan, your company pays a premium. The premium rates are fixed for a year, and you pay a monthly premium based on the number of employees enrolled in the plan. Your monthly premium only changes during the year if the number of enrolled employees in the plan changes.
The insurer collects the premiums and pays the health care claims based on the benefits in the policy you purchased. The members are responsible to pay any deductible amounts or co-payments required for covered services under the policy.
The cost of a self-funded plan has fixed components similar to an insurance premium. The administrative fees, stop-loss premiums, and any other set fees charged per employee are referred to as fixed costs and are billed monthly based on plan enrollment. The employer sponsoring a self-funded plan also pays the claim costs incurred by the members enrolled in the plan, and this cost varies from month to month based on plan utilization. Stop-loss insurance reimbursements are made if the claims costs exceed the catastrophic claims levels in the policy. So the total cost of a self-funded plan is the fixed costs plus the claims expense less any stop-loss reimbursements.
Capping Catastrophic Claims Risk
Even though these plans are called self-funded plans, an employer typically does not assume 100% of the risk for catastrophic claims. Rather, the employer buys a form of insurance known as stop-loss or excess-loss insurance to reimburse the employer for claims that exceed a predetermined level. This coverage can be purchased to cover catastrophic claims on one member (specific coverage) or to cover claims that significantly exceed the expected level for the entire group (aggregate coverage).
Creating Your Self-Funded Plan
The flexibility of self-funding helps employers use their health benefit plan the way health benefits were originally intended – to attract and retain the finest employees. Benefits can be customized to meet your employees' needs and to satisfy company objectives. ACS will help you design your self-funded plan and handle all day-to-day administration.
All of our self-funded plans typically have access to a broad regional or national PPO network that offers members convenient access to care. We'll design your company's self-funded plan around the PPO that best meets your needs.
Consumer directed health plan options are also compatible with self-funded plans. For example, we can pair a high-deductible self-funded health plan with a Health Savings Account or a Health Reimbursement Arrangement.
Is Self-Funding Right for You?
We can help determine whether self-funding is appropriate by reviewing a current employee census, premium rate history, and the parameters of your current plan. Most importantly, analyzing these items will help us evaluate all the alternative strategies available, including consumer directed health plan options. We will work with you to determine proper levels of coverage and all plan parameters.