Page 6 - The Value of Self-Funding
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6
THE
STEP-BY-STEP PROCESS
FOR SELF-FUNDING
ADEQUATE RESERVES MUST BE AVAILABLE TO HANDLE THE EXPECTED
CLAIMS PAYMENT LOAD, AS WELL AS MONTHLY PAYMENT REQUIREMENTS,
WHICH ARE UNPREDICTABLE AND CAN VARY WIDELY MONTH TO MONTH.
In many cases, self-funding is a viable means for companies with strong balance sheets, stable work forces and
executive leadership teams that want to take a proactive approach to managing their insurance costs.
The first step to self-funding is traditionally an internal feasibility study that is guided by an insurance broker or
third party administrator (TPA). This study includes a risk and cash flow analysis to determine if the level of risk
is acceptable and if the company has monetary resources to set aside for potential future loss and management
resources. A listing of TPAs and other self-insurance providers can be accessed on-line at
.
Click on the
“Getting Started”
link (at the bottom) included as part of the
“Employer Section.”
0
10% 20% 30% 40% 50% 60% 70% 80%
TRANSPORTATION/COMMUNICATIONS/UTILITIES – 80%
MANUFACTURING – 68%
STATE/LOCAL GOVERNMENT – 67%
FINANCE – 64%
RETAIL – 63%
HEALTHCARE – 60%
WHOLESALE – 51%
AGRICULTURE/MINING/CONSTRUCTION – 43%
Self-Funding By Industry Type*
*Kaiser/HRET Survey of
Employer-Sponsored Benefits 2011
