Fully-Insured vs Self-Funded

An employer that fully understands the health care market can take advantage of its savings. 

An employee that fully understands their health care plan can make the right choices.

Full v Self Diagram

Fully ‐Insured Plans:

  • Premium exchanged for coverage
  • State mandated benefits usually included
  • Often pre ‐determined plan design options
  • Limited reporting
  • Vendors are usually controlled by the carrier
  • Pooled Risk

Self ‐Insured Plans:

  • Pay as you go coverage
  • Customized plan design
  • Cash flow advantage/reserves
  • Limitless reporting
  • Vendor management/Best in Class partners
  • Unbundled approach

 

Is Self-Funding Right For Your Company?

A common but mistaken impression is that self-funding is only for large employers. In fact, self-funded health plans can be prudently set up by smaller employers as well. Stop-loss insurance allows smaller employers to consider this very economical approach to providing employee health benefits because it protects them from large claims. The only way to know if your organization can benefit from self-funding is to analyze your existing plan design and recent claims experience. SVG provides this analysis at no cost or obligation. Isn’t it time you learned more about self-funding with SVG?

 

Creating Your Self-funded Plan

The flexibility of self-funding helps employers use their health benefit plans the way they were originally intended – to attract and retain the finest employees in the industry. Benefits can be customized to meet your employees ‘needs and to satisfy company objectives. SVG will help you design your self-funded plan and handle the day-to-day plan administration.

All of our self-funded plans have access to a multitude of networks, which offers covered person’s convenient access to care. At SVG we can offer self-funded plan design options that start with a basic Preferred Provider Option plan structure; a Point-of-Service option, where personal care physicians help covered persons manage their care; or an Exclusive Provider Option, which maximizes in-network utilization.

Consumer-directed health plan options are also compatible with self-funded plans. For example, we can pair a high-deductible self-funded health plan with a Health Savings Account or a Health Reimbursement Arrangement.

 

Capping Catastrophic Claim Risks

Even though these plans are called self-funded plans, an employer typically does not assume 100% of the risk for catastrophic claims. Rather, the employer buys a form of insurance known as stop-loss or excess-loss insurance to reimburse the employer for claims that exceed a predetermined level. 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).The cost of a self-funded plan has fixed components similar to an insurance premium, e.g., administration fees, stop-loss premium, and variable costs (the claims expense). The administrative fees, stop-loss premiums, and any other set fees charged per employee are referred to as fixed costs and are billed monthly based on plan enrollment just like an insurance premium. The employer sponsoring a self-funded plan also pays the claims costs incurred by the covered persons enrolled in the plan, and this cost varies from month to month based on health care use by the covered persons. Stop-loss insurance reimbursements are made if the claims costs exceed the catastrophic claims levels in the policy. So the total cost of a self-funded plan is the fixed costs plus the claims expense less any stop-loss reimbursements.

 

Traditional Self-Funding

Two-thirds of employees in the U.S. who are covered under an employer-sponsored health plan are covered by some form of self-funded health plan. The following are just a few reasons why employers select self-funding:

Increased Financial Control
Most employers with self-funded plans fund claims as they come due rather than funding them through advance premium payments, which means that you are investing your money instead of an insurance company. We provide you with clear reports and documentation of how every dollar is spent.

Lower Costs
By funding claims directly, an employer avoids the costs of claim reserves, retention to cover the insurance company’s administrative costs, profit margin, risk charges, premium taxes, and a contingency margin, which are included in an insured premium on top of the costs of expected claims. Today, these reserves and retention charges can range from 10% to 30%.

Greater Flexibility
Self-funding allows employers to design a health benefit plan to address specific employee needs, as well as company objectives. Self-funded plans are also exempt from state insurance laws that typically mandate certain benefits for insured plans.

Cost Management
Plan design flexibility and on-going analysis of plan expenses allow self-funded employers to make the plan design changes needed to manage costs. Self-funded plan designs can include strategies to monitor utilization, steer care to discounted provider arrangements, and assure appropriateness of care, all of which encourage wellness and provide incentives for wise utilization of care.

Information Management
The TPA provides convenient, secure access to all the information needed to manage a self-funded plan effectively. Authorized individuals of a self-funded employer receive confidential monthly reports, and everyone covered under the plan has secure online access to timely benefit-related information.