Fully Insured – the employer purchases a standard healthcare coverage from a commercial carrier such as UHC, BCBS, Cigna or Aetna. The insurance company takes the risk associated with the employees’ healthcare and the profit when premiums exceed claims costs.
Self Funding – the employer takes on the financial risk of the employee healthcare benefits. This allows the employer to design their health plan that best fits their employee healthcare needs. While the employer will normally contract with an independent third-party administrator (TPA) to administer the plan. The employer is the fiduciary of the plan and is the decision maker on how employee benefits are administered.
There are many advantages to being self funded:
- It allows the employer to have more flexibility in the benefits they choose for their employees which can improve employee retention and satisfaction.
- The plan keeps the profit margin between the cost of fully insured and administrative cost of self-funding. Over many years, this can result in a substantial increase in a company’s bottom line.
- The plan can purchase stop-loss insurance to protect the plan from catastrophic claim costs, which will give the plan a more stable benefit cost structure.
- Self funding gives the plan more control over its healthcare expenditures.
In 2021 the Kaiser Family Foundation analysis found that 64% of the US employees were employed by a self-funded employer. The vast majority of businesses with 200 or more employees are self insured with 82% of covered employees enrolled in self-insured health plans.
For companies considering moving from fully insured to self funding, it is critical that they select partners that can help them navigate the self-insured market and not just select the lowest premium.
USBenefits has been supporting plans with stop loss insurance for over 15 years. Our team averages over 30 years’ experience in the health insurance industry. We have the knowledge and experience to work with your TPA to ensure medical payments are accurate based on the employer’s healthcare plan.