Self Funding

Is Self-Funding right for you?

Self-funding is an effective method for taking control of health care expenditures and creating financial & operational efficiencies that inure to the benefit of both the employer and its employees. These benefits require a long term commitment which, like any long term fiscal decision, requires a sound understanding of both the advantages and potential disadvantages of self-funding.

Contact BAS to determine if self-funding is a good fit for your organization.

Advantages

Disadvantages

  • Overall Control
    Complete flexibility of plan design, funding & reserve margins
  • Monetary
    Money previously held in the form of reserves, incurred claims & reserve/claims profit margin is held in your accounts and earns interest for you
  • Reduction of Premium Tax
    Self-funded plans are not subject to the premium taxes fully-insured plans pay
  • Elimination of State Mandated Benefits
    State mandates are not enforced as plan is governed solely by ERISA
  • Administrative Efficiencies
    By utilizing a Third Party Administrator eligibility, billing, claims payment & claims resolution is streamlined through one location. Client satisfaction is increased and plan performance is maximized
  • Reduced Operating Costs
    Administrative fees incurred by TPAs are often lower than in fully-insured arrangements
  • Reporting
    Accurate, detailed claims utilization reporting & analysis is available to self-funded plans that is not readily available to their fully-insured counterparts
  • Cost and Utilization Controls
    The plan dictates how much or little medical management to incur within the plan
  • Financial Risk
    While current Reinsurance contracts create minimal risk overlap,
  • Increased Employer Education
    A successful self-funded plan requires Management buy-in in the form of health care education. Medical trends, claims analysis & employee communication is critical to ensuring the maximum benefit from self-funding
  • Decreasing Population
    If an employer incurs a large downward swing in enrollment, the concurrent claims lag, decreased premium and census change can cause cash flow issues as well as jeopardize Reinsurance contracts.
  • Return to Fully-Insured
    In the period a plan sponsor returns to fully-insured, it is responsible to fund both run-out claims as well as fully-insured premium. This can cause a double-expense effect in the first few months of the new plan.

Costs Comparison

Re-insurance Risk Management

Specific Coverage Aggregate Coverage

Specific stop-loss limits your liability for claim expenses to a specific dollar amount. When a claim exceeds the specific limit, you will pay the claim and the stop-loss carrier will reimburse you for any amounts above the limit. This limit will be predetermined at the start of the contract year and is determined by the your risk retention and the number of employees.

Aggregate stop-loss limits your overall liability for the entire group. Several factors are used to determine the aggregate limit, which is usually set at 120 - 125% percent above the estimated paid claims. When the total claims reach the aggregate limit, you continue to pay the claims and the stop-loss carrier will reimburse you.