Benefits of Self-Funding your Employees Health Plan

1. Benefits of Self-Funding your Employees Health Plan Being an employer, self-funding your employees’ health benefits indicates that you are ready to take on the risk and responsibility of paying all the covered health claims of your employees, instead of paying the insurance company to accept that risk. Though you take on the risk, but the fact is that you might also benefit from lower costs. This might prove to be an effective alternative to buying health insurance coverage. But as you plan for the coming benefit year, consider the following benefits of self-funding, and whether it might be financial strategies that can help your organization meet its desired goals: Enhanced Flexibility Since the insurance carriers sell pre-designed, fully insured health plans with restricted benefits under a self-funded arrangement, a third party administrator can customize a plan to the exact specifications of the employer at a beneficial level. Lower Administrative Costs With employer self-funded health plans, employers avoid the costs of claim reserves, risk charges, premium taxes, and contingency margins. Magnified Cash Flow The fully-insured plans require an advanced premium payment, but under a self-funded plan, claims can be funded as they are due, which enables employers to keep more money in the account where interest can be earned on the amount.

2. Actionable Data The fully-insured plans receive minimal experience data from their carriers, which limits an employer to understand the factors that are affecting the costs. On the other hand, the strategic third party administrators can offer their self-funded plans with fully customized data, and the predictive modeling solutions, that can be used to help guide design strategy with an effort to mitigate the cost-drivers. Strategic Service Third party administrators are highly trained in the intricacies of self-funding. They are the experts who work to cooperate with the employers and their consultants in order to manage the plan properly to optimal efficiency. Organizations usually decide to be self-funded because it lets them predict the cost based on their specific claims history and make any necessary judgements. If the claims are way lower than expected, they can further invest the money in the business or offer incentive benefits for the wellness of the employees. And if at all, the claims are high; their stop-loss insurance can cover it. Moreover, there can also be tax advantages of self-funding. Under the health care reform, there are some taxes related to risk that apply only to the fully insured health plans. By switching to self-funding, organizations hope to eliminate some taxes from their budget.