A self-insured or self-funded plan is one in which the employer assumes some or all of the financial risk of providing health-care benefits to their employees. Employers typically pay for claims as they are incurred, through a corporate bank account, rather than paying an insurance company to maintain those “reserves.”
Most self-insured employers also carry stop-loss insurance to pay unpredicted or catastrophic claims, thereby transferring the most significant risk to an insurance company. Although self-insured employers can administer the claims in-house, most contract with a third-party administrator (TPA) to manage the plan.
One of the benefits of self-insured plans is that the employer does not have to prepay claims, retaining funds that might otherwise have been spent. Also, the employer can design the plan to suit corporate or employee needs. There is also an additional savings as a self-insured plan is not subject to state health insurance premium taxes.
Self-insured plans can result in significant savings to a corporate health insurance plan. Benefit Design will explore the viability of this funding method for your health insurance program.
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