What is Self Funding?
- A self-funded company pays for claims when necessary instead of paying a fixed premium to an insurance carrier.
- The employer assumes the financial risk of employees’ healthcare benefits. However, case management, stop-loss coverage and underwriting limits the risk.
- Self funding enables a company to pay the medical claims of employees directly with a trust fund.
- With self-funding, an employer is only responsible for the actual costs of employees’ healthcare.
Self-Funding Risks & Benefits
Risks of Self-funding
- Self-funding places the pressure on the employer to reserve enough money in the trust to cover the likely, estimated expenses.
- Without the purchase of “stop-loss insurance” a catastrophic event for one or more workers could financially challenge the company.
- Self-funding without a network partner (such as MedNet) would require the company to take on all administrative costs.
- Some self-funding products require up-front payments or costs.
- “Lasering” or increasing the rates on re-insurance due to specific employees in your population can occur in the re-insurance market; however, even in the open commercial insurance market a similar cost occurs as an overall distribution of premium increases. High risk pools may lower this risk by 2014.
Benefits of Self-funding
- An organization with good claims experience will see savings from self-funding; particularly those that are healthy or young.
- Self-funding enables you to tailor a plan meeting the needs of your employees and organization.
- Stop-loss insurance essentially allows the company to set its own company-wide deductible and never worry about costs above this.
- Wellness plans and employees engaged in their healthcare can truly affect insurance costs and see real savings for their efforts.
- Products exist that allow a company to self-fund without up-front costs and to standardize cash-flows.
- The financial down-side of self-funding is protected via re-insurance while the potential financial upside is unlimited.
- Any employer with over 50 employees can self-fund in Maine.
- A small self-funded plan is like a group of workers pooling their medical savings accounts (think of the old credit union model) and is much more cost effective than the inflexible commercial market rates imposed.
- Statistics state that between 67%-85% of all of America’s employers self-fund.
How to Self-Fund
- A Third Party Administrator or “TPA” can design the correct benefits plan and help you map out the best way to become self funded.
- The TPA will garner quotes from various networks of providers and report back the value each provides.
- You then select your provider network and work with your TPA to start finding ways to save money.
How can MedNet assist moving forward?
At MedNet, we understand that the decision to become self-funded takes time and careful consideration.
- We will assist you every step of the way as you discuss the approach with your organization‟s various stakeholders.
- If you would like someone from MedNet to attend meetings and provide additional information or materials, simply call us
- Throughout the self-funded process, MedNet can also offer insights and support of strategic partners in communicating the change to your employees and minimizing the effect on your day-to-day operations.