Factors to Consider for Self Funding Your Health Plan

Factors to Consider

If you are considering a self-funded health plan for your company you are certainly not alone!    Many employers, both small and large are now exploring the option of self insuring their health plan for a variety of reasons with larger long term savings topping the list.   However, self funding isn’t right for everyone; therefore we will discuss some of the factors you’ll want to consider before making any changes to your health plan.

What is a self-funded plan?

A self-funded health plan, also known as self insurance is when the employer assumes the risk of the medical claims incurred by their members.   Typically the plan sponsor does not assume 100% of the risk, as you are able to purchase additional stop loss coverage through a reinsurance carrier.   This is in contrast to a traditional fully insured plan where the plan sponsor pays an annual fixed premium to the insurance company, and in turn the insurance company assumes the risk.

Is a self-funded plan right for my company?

A qualified insurance broker can help you determine if self insuring is right for you.   Initially, they’ll want to look at your current plan design and claims experience.   In addition, here is a brief list of some of the other factors you’ll want to consider before going self insured:

  • Financial stability of your company
    • Are you able to absorb some risk?
    • Do you have a pool set up to pay for large claims?
  • Amount of retirees
    • Do you cover retirees?
    • If you do, is there a large amount?
  • Claim History
    • Are there any large ongoing claimants?
  • Age and gender of your employees.
    • On average women are more costly than men and older employees have more health concerns.
  • Commitment to this course of action
    • Are you able to dedicate the time and efforts to sticking with stop loss insurance for the long haul? Savings might not be immediate, but over time!
    • Stop Loss Insurance will protect you from catastrophic illnesses that go over a certain set deductible. This is extremely important so you do not drain your reserves.

These are not the only factors that can be used to evaluate if self funding is right for you, but just some important points to consider.   It might seem daunting to go from a fully insured plan to a self insured plan.   However, Stop Loss Insurance Brokers, Inc. would be more than happy to help you determine if this is a viable option for you and your company, as well as ensuring a smooth transition.