SELF FUNDING vs. FULLY INSURED

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SELF-FUNDING vs. FULLY INSURED

 Have you heard the terminology “Self Funding” and had no idea what is being talked about?

Self funding is a leading option for companies who are struggling  with the rising costs of healthcare, which is also known as self-insured  insurance. Independent studies have shown that self-funding can cost as  much as 40% less than comparable coverage via insurance companies. In  addition, TPA's offer a cost-effective outsourcing solution to the administrative services associated with a self-funded plan.

In self-funded health plans the employer takes on the financial risk  of the plan. The company pays out-of-pocket for their employees  healthcare expenses as they are incurred. It differs from fully-insured  health plans where the employer pays the insurance carrier a  pre-determined premium and in return the carrier pays for the healthcare  expenses. With a self funded plan, the employer relies on a TPA to process claims on their behalf, which is what BRMS does for its clients.

It is important to note that self-insuring exposes the company to  much larger risk in the event that more claims than expected must be  paid. With a self-funded health plan there are two main costs that need  to be considered: fixed costs and variable costs.

  •  Fixed costs include administrative fees, stop-loss premiums, and  any other set fees charged per employee. These costs are billed monthly  by the TPA or carrier, and are charged based on plan enrollment also  known as a per employee per month (PEPM) fee.
  • Variable costs include payment of health care claims incurred. These  costs vary from month to month based on health care use by covered  persons (ie. employees and family and/or dependents). These could vary  based on routine dr appts to emergency room or urgent care visits.
  •  To limit risk, some employers use stop-loss insurance which  reimburses the employer for claims that exceed a predetermined level,  usually high claims of 50k+. This coverage can be purchased to cover  catastrophic claims on one covered person (specific coverage) or to  cover claims that significantly exceed the expected level for the group  of covered persons (aggregate coverage).

Self funding also has a lot of benefits that can outweigh the risks,  including: a customizable & flexible plan design to meet the needs  of your workforce, an effective long term solution for employers who  want to offer a stable employee benefit plan, improved cash flow due to  not having to pre-pay for coverage, and lower tax because self-funded  plans are not subject to state health insurance premium taxes.


We can provide you with full service claims administration, plan  design & consultation, risk assessment & insurance underwriting,  medical management, utilization review, data warehousing &  reporting, PPO network management, and much more!