CONSIDERING SELF-FUNDING YOUR BENEFIT PLAN?
WHY SHOULD YOU BE SELF-FUNDED?
According to a 2000 report by the Employee Benefit Research Institute (EBRI), approximately 50 million workers and their dependents receive benefits through self-insured group health plans sponsored by their employers. This represents 33% of the 150 million total participants in private employment-based plans nationwide.
THE ADVANTAGES OF SELF-FUNDING ARE NUMEROUS AND VALUABLE:
- State mandated benefits might be excluded. Examples include minimum coverage requirements on specific benefits such as TMJ, alcoholism, mental illness, etc.
- Investment gains can be made from plan reserves. Your benefit dollars remain in your account until benefits are actually paid, thus allowing you to maximize investment income
- Pre-payment for coverage is not required, as it is for insured plans…again, the cash stays in your account until benefit payments are made
- Valuable reduction in state taxes on plan premiums. Typically state taxes on plan premiums are 3% …this translates into direct savings for your company
- Administrative expenses for fully insured plans are usually much higher than for self-funded…again, this translates into savings for you
- Insurance company profit is not part of your employee health benefit cost. You pay for benefits used
- Avoid adverse risk charges: Only your claims experience will determine your reserves…poor experience from other groups will not impact your plan
- Customize your plan to meet your company’s specific needs, including reinsurance levels and the amount of risk your organization is willing to take