Self-Funding: Fact vs. Fiction
Myth #1: Most self-funded plans are totally self-funded
Except for the very largest corporations, most employers who choose to self-fund their employee health plan really “partially” self-fund, meaning they purchase insurance to cover catastrophic claims that exceed actuarially anticipated levels.
Myth #2: Only very large companies can afford self-funding
Most of the recent growth in self-funding has actually been among smaller companies, some with as few as 25 employees. The economic advantages of self-funding do not change with the number of employees enrolled in the plan. The key is purchasing the appropriate level of coverage for catastrophic claims, which is referred to as stop-loss or excess-loss insurance. Many smaller companies have found self-funding to be very cost effective and flexible. Regardless of the number of employees enrolled in a self-funded plan, strategies such as utilization management and wellness-related education can be integrated to allow the self-funded concept to yield even greater benefits.
Myth #3: Self-funded plans are often rejected by health care providers
Today, some form of self-funding covers two-thirds of the employees covered under an employer-sponsored health plan. Health care providers see patients that are covered by self-funded plans every day.
Myth #4: Self-funding is too much work for the employer
An employer is required to do little more day-to-day administrative work with an ACS-managed self-funded health plan than with an insured plan. We handle the day-to-day claims processing and virtually all customer service inquiries.
Myth #5: Self-funded plans are not subject to regulation
Nothing could be further from the truth. Self-funded plans are subject to the Employee Retirement Income Security Act (ERISA), which was designed by Congress to provide stringent consumer protections. ERISA requires that each benefit transaction follow the coverage provisions outlined in the plan document. Furthermore, HIPAA Privacy, Security, and Portability provisions also apply to self-funded plans. At ACS Benefit Services, we make sure our business practices comply with these regulations, and we help our clients with regulatory compliance.