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])
- 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.
EmSpring has self-funded health plan clients throughout the Pacific Northwest.