Page 7 - The Value of Self-Funding

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• Workplace Demographics
Age, gender and other demographic factors, such
as smoking and obesity, should be considered.
• Funding Considerations/Cash Flow
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. Additionally, financial resources should be
available to take advantage of discounts that can
be negotiated with providers for timely payment.
• Employee Value/Cost Control
The plan must be of real and perceived value to
the employee while simultaneously controlling
employer costs.
• Administrative Time Requirements
The employer will have to allocate time for
management to oversee administration of the
plan, even if a TPA or ASO is engaged.
• Administrative Costs
There will be up-front costs for consultants, legal
and accounting advice and plan development.
There will be ongoing administrative costs
whether the employer self-administers or contracts
with a third party administrator (TPA) or
administrative services offered by an insurance
company (ASO) to administer the plan.
• Medical Management Services Costs
These are costs for utilization review, case
management, disease management, wellness
programs etc., which theoretically will reduce
claims expenditures over time.
• Stop-Loss Insurance Options
The cost of singular and aggregate coverage to
limit the employer’s liability will depend in part on
the number of employees, employee
demographics and claims history.
• Plan Benefit Coverage Options
Costs will vary depending on what the plan covers
and how much of the responsibility will be
placed on the employee through co-payments
and deductibles. A plan must be created in
order to project costs and cash flow requirements.
Additionally, companies considering self-funding should examine:
LEGAL ADVICE
ACCOUNTING ADVICE
CONSULTANTS
ADMINISTRATIVE COSTS
FINANCIAL RESOURCES
EMPLOYEE DEMOGRAPHICS