There is an alternative to the traditional insured benefit plan – self-insurance, which is also known as self-funding. The enactment of the Affordable Care Act (ACA) has made considering self-funding employer-based health benefits more attractive as some of the provisions of the ACA may not apply to self-funded plans. Under a self-insured plan, it is often possible to reduce claims costs significantly while maintaining control over reserves. In this type of program, you fund only the claims of participants and their dependents as claims are incurred. In addition, in order to provide an extra measure of financial protection against catastrophic claims, most self-insured employers purchase Stop-Loss Insurance.
Self-funding provides additional benefits as well such as:
• Flexibility in designing a plan that best suits your needs
• Comprehensive understanding of cost allocation to develop a contribution strategy
• Elimination or reduction of premium taxes*
Under a self-insured program, the group medical plan is typically the primary focus. However, other health benefits, such as prescription drug, dental, vision and short-term disability, are often self-funded to help employers retain full control over the design and management of these programs as well.
Want to know more? Contact one of our professionals today for more details.
*This information does not constitute legal or tax advice. As with all tax planning, please consult your attorney or tax advisor.
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