What are Self Funded Health Plans?

A Self Funded Health Plan—also known as a Self-Insured Plan—is a type of health coverage where the employer assumes the financial risk of healthcare benefits. The employer will pay for claims out-of-pocket instead of paying a premium for a Fully Insured Health Plan.

Why do Employers Self Fund Their Health Plans?

There are both benefits and drawbacks to Self Funded Health Plans. An employer who chooses this type of plan will usually set up a dedicated account to allocate funds for claims. Depending on the kind of account set up, the funds may earn interest, which can help offset the contributions the employer makes out-of-pocket. Other benefits if a self funded plan include:

  • Customization — Sometimes, healthcare packages include or exclude crucial benefits. A Self Funded Health Plan offers the highest amount of customization to meet the needs of employees best.
  • Maintain greater control — Insurance companies invest premiums they receive to maximize interest. The employer can choose to invest the funds in reserve to achieve the same result.
  • Improved cash flow — Since the employer doesn’t need to prepay for coverage premiums, its cash flow is improved.
  • Fewer regulations — Because Self Funded Health Plans are not subject to state mandates, the employer would only need to focus on the federal regulations under the Employee Retirement Income Security Act (ERISA).
  • Lower taxes — The employer would no longer be liable for state taxes on healthcare premiums. This could translate to an instant tax-reduction of 2-3% of the premium’s value.
  • Choice of network providers — Self Funded Health Plans enable employees to have more freedom of choice for providers.

Self Funded Health Plans are quickly becoming more prevalent for smaller businesses because of the significant amount of control employers and employees have over their coverage. While not appropriate for every business, those who choose this type of health plan often see it as a win-win for both employers and employees.

Why Choose a Self Funded Health Plan?

With a Self Funded Health Plan, the employer is assuming more risk. However, the risk can be mitigated by obtaining a stop loss insurance plan. This does protect the employer against the possibility of exceeding the health plan reserves in the event of an excessive claim. In many cases, health insurance carriers will execute products specifically for self-funded plans.

Given the significant benefits a Self Funded Health Plan can provide, it may make sense for your business to explore this option when planning your employee healthcare strategy. Luckily, it’s not something you have to do alone. Choosing a broker to assist with setting up the plan will save you time, money, and headaches. They can guide you through the process and help you decide if it is the right choice for your business and your employees.

Choosing the Right Broker for Self Funded Health Plan

Choose DesignTM Health for all your health insurance options. We provide unique solutions that will fit your business’s individual needs. DesignTM Health’s exceptional business value is to provide a variety of health insurance solutions for businesses with an added emphasis on service, tech solutions, benefits booklet as well as streamlined backend administrative functions.

DesignTM Health helps provide group, family, and individual insurance plans. We work with a variety of plan providers to find the best solution for you. We encourage you to reach out to us today to discuss your business health insurance needs. Our knowledgeable and friendly representatives will walk you through all your options in a simplified process.

We know that navigating the employee health insurance field can be confusing and arduous. We are dedicated to streamlining the process, leaving you with more time to devote to the things that matter most. TM Health” href=”tel:7203302283″>(720) 330-2283!

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