Self-Funded (Self-Insured) Employee Benefits

Self-funding, or self-insuring, employee benefits (medical and dental) is an increasingly attractive option for many employers, whether large enterprises or small- to mid-size businesses. The primary difference between self-insured (self-funded) and insured plans is with where the risk lies. Should you choose to self-insure, we strongly recommend and assume that you will carry stop-loss insurance, which limits the risk your organization undertakes when choosing to self-insure.

What does it mean to self-insure (self-fund) employee benefits?

Regular medical insurance transfers the risk of loss to an insurance carrier in exchange for a fixed monthly premium paid to the carrier by the employer. Self-insured companies retain the risk themselves, paying for all claims either from a trust or directly from corporate funds.

Is self-insurance (self-funding) common?

Many employers with more than 200 employees self-insure some or all of their health and welfare benefits. Self-insurance for employers with fewer than 200 employees is also prevalent, though these employers usually need greater stop-loss insurance protection than the larger employers.

Self-insured health plans in Washington State are very common. In fact, over half of EmSpring's group health plan clients are self-funded, with several that have been in force for over 20 years. It happens to be our strongest market niche.

What employee benefits can I self-insure?

• Health care (indemnity, PPO, POS, and HMO [only if large enough group])
• Dental
• Short-term disability
• Prescription drugs
• Vision care

What benefits should not be self-insured?

• Any life insurance benefits, including AD&D and travel accident
• Long term disability - LTD (unless coverage is for a very large group or very limited)
• Long term care - LTC

Deciding if self-insurance is right for your employee benefits.

Making the decision whether or not self-insurance is right for your employee benefits is tough. You may want to self-insure some or all of the benefits. Then there’s determining what stop-loss insurance is right for your employee plan. We can help with all these “to do” items:

• Hire a competent broker with a solid book of self-insured clients as references (like EmSpring!).
• Assess the volatility of claim experience for the past three years.
• Obtain administrative services only (ASO) and/or stop-loss quotes at several different deductible and aggregate levels.
• Compare the costs and risks of the different quotes against the insured premium cost.
• Weigh the self-insured plan advantages of flexibility and lower average cost versus the increased risk and associated greater responsibilities.
• Choose the optimum solution based upon analysis.