The Benefits of Self-Funded Health

Insurance

Discover why self-funding is one of the most effective ways for employers to control the rising cost of healthcare coverage.

What is self-funded health insurance?Also known as ASO (Administrative Services Only), self-funded health insurance is essentially a self-insurance plan where an employer provides health and dental insurance or disability benefits to employees with its own money. The employer accepts the financial risk for providing healthcare benefits to its employees.

In other words, self-insured employers pay for claims out-of-pocket as they come up instead of paying a fixed premium for a plan that’s fully insured to an insurance carrier.

Self Funding: ExplainedSelf-funding is one of the most effective ways to control the rising costs of healthcare coverage if you’re an employer, because employers have a large say when it comes to the design of the medical benefits plan. In the past, employers have turned to self-funding their dental/health insurance plans when traditional insurance programs did not meet their cost expectations.

Since the employer is funding the risk directly from its assets rather than obtaining medical coverage from an insurance carrier, stop-loss insurance may be set up to limit the employer’s loss to a specified amount. Stop-loss insurance ensures that catastrophic claims don’t ruin the financial integrity of the self-funded plan.

How it worksOnce the employer has designed a self-funded dental/health insurance plan, a Summary Plan Description (SPD) is written up and given to covered employees. The SPD will explain all the plan’s provisions, such as eligibility, coverage descriptions, and plan exclusions and limitations.

The Third Party Administrator (TPA) will usually prepare the plan booklets, ID cards, provider directories, and other materials. The TPA also administers the plan and has the responsibility of maintaining eligibility and adjudicating and paying claims. They also provide the customer service for anyone who may have questions regarding the plan.

What are the benefits of self funding? As an employer, you want to provide good dental/health insurance to your employees without having to spend outrageous amounts of money. With dental and health insurance rates getting higher and higher, you may be looking for something other than fully insured plans.

Learn why it is advantageous to go with self-insured dental/health insurance plans:

1. Tax Benefits● Most premium tax is

eliminated. While there is no premium tax on the self-insured claim expenditures, there is a premium tax on the stop-loss premium, but it’s much lower than a fully insured premium.

2. Flexibility● Self funding offers employers plan design flexibility. The employer has

control when it comes to designing the best plan to meet the needs of the employees and employer and the flexibility to make changes to the design at any time.

3. Improved cash flowWhen money that was once held by the insurance carrier (through reserves)

is made available to the employer, cash flow is improved. Plus, the employer has overall increased financial control. Since the employer is funding claims as they come rather than funding them through advance premium payments, the employer is investing its own money and is aware of how the money is being spent.

4. Efficient claims serviceThe Third Party Administrator should be fast and efficient. When it comes to

getting ID cards and being provided with enrollment options, employers shouldn’t be waiting for more than 72 hours. With this comes lower administration costs. Administrative costs for a self-insured program through a TPA are usually significantly less than the administrative costs included in the premium by an insurance carrier.

5. Optional mandatory benefitsSelf-funding is controlled by federal legislation, which means state

regulations requiring expensive benefits are optional.

6. Access to information With self funding, information is constantly available. Employees should be able to access claims and eligibility information online and they should have a friendly, dedicated customer service team they can call whenever they have questions.

Call EMI Health Today to Learn More about Self-Funded Health PlansWith comprehensive benefit plans and outstanding provider networks, EMI HEALTH is a full-service health insurance organization with a mission to provide the best possible benefits for the lowest cost. If you’re interested in setting up self-funded health insurance for your company, contact EMI Health today by calling 1-800-662-5851 or go to emihealth.com.