Page 4 - The Value of Self-Funding

4
Risk Management - Charges, Commissions and Retention
One advantage of self-funding is the flexibility in controlling risk. Business objectives of self-insuring employers
revolve around the best use of their money devoted to benefits: controlling claims, managing and benefiting from
investments. Compared to fully insured plans, a self-insured health plan can allocate more of each dollar toward the
payment of medical claims, eliminating insurance commissions, risk charges and other costs of a commercial insurer,
such as marketing and overhead. Costs also decrease thanks to the sponsor’s ability to exert greater control over
administrative expenses and utilization.
Improved Cash Flow
Self-funding allows claims to be paid as they are incurred while fully insured premiums constitute a form of
prepayment. With self-insurance, a plan can delay payment of recurring health plan costs until the services have
been rendered. Commercial insurers, by contrast, set health insurance premiums at levels that anticipate projected
increases in healthcare costs—usually well in excess of the actual rise in costs.
Innovative Plan Document Design and Control
Decisions about plan design belong to the employer and not an insurance company. The employer can design his
or her plan without the restrictions, delays and costs involved in obtaining the approval of an insurer or regulatory
agency; thus, employers make the overall compensation package more attractive, and plan design options can be
tailored to the working population and company preferences. Language can be modified to fit individual plan needs,
and accurately reflect the true intentions of the plan.
Value-Based Benefits and Wellness Programs
As medical costs have continued to skyrocket, sponsors have been taking steps to reduce medical costs by
emphasizing prevention and care for chronic diagnoses. Employers have the flexibility to design and integrate such
elements as health risk assessments, disease prevention and wellness programs tailored to the specific employee
demographics and needs.
SELF-FUNDING-THE SOLUTION
OVER 100,000,000 AMERICANS
RECEIVE THEIR HEALTH
INSURANCE TODAY THROUGH
SELF-FUNDED BENEFITS.