With a fully-insured or traditional health care plan, monthly premium rates are fixed, based upon the number of employees enrolled in the plan. Monthly premiums only decrease when less employees are enrolled. Regardless of how many claims are filed (or not filed) by employees, employers pay the same amount every month.
With a self-funded health plan, employers pay claims as they are incurred. Typically, a self-insured employer will set up a special trust fund to earmark money (corporate and employee contributions) to pay incurred claims. When claims come in lower than predicted, employers save money. Risk management tools, including stop-loss insurance, protect employers in the event that claims exceed a predetermined level.
With self-funding, part of an employer’s monthly payment is used to cover fixed costs such as stop loss insurance premiums and administrative expenses, while the remainder is used to fund expected claims.
Self-Funding Partners works with employers to determine the benefit plan that works best for the needs of their employees. This includes developing wellness strategies and utilization incentives which have a direct impact on claim costs.
Costs can also be reduced when self-funding is integrated with health accounts, creating a “partially self-funded health plan.” For example, by raising the deductible on the group health insurance plan, an employer may self-insure the difference with an integrated HRA or Health Savings Account (HSA). This often reduces health care costs for both the employer and the employee.