A self-funded (or self-insured) group health plan is an alternative type of group health insurance for businesses. It’s one wherein employers assume the financial risk associated with providing health care benefits to their employees.
Rather than paying fixed premiums to an insurance company—which, in turn, assumes the financial risk—you can pay for medical claims out of pocket as they are incurred.
Why would you ever want to pay out of pocket? It seems counterintuitive but there are advantages in offering self-funded health plans to your team.
They’re customizable. Instead of trying to purchase a “one size fits all” health plan, self-funded plans can be customized to fit the needs of your workforce.
You have more control (and more interest). With a self-funded plan, you control the health plan cash reserves, allowing you to maximize interest income Note: Insurance companies generate interest income for themselves by investing premium dollars.
Your financial statements will look better. Self-funded coverage is not prepaid, as it is when paying premiums to an insurance company. Therefore, if you self-fund your health plans, you’d have improved cash flows.
You can say goodbye to state vs federal confusion. Self-funded plans are not subject to conflicting state health insurance regulations and benefits mandates. Instead, these plans are regulated by federal law.
Also say goodbye to state insurance premium taxes. With self-funded plans, you are not subject to state health insurance premium taxes.
You have a better shot at getting an insurance provider and/or network on your terms. Self-funded plans allow you to contract with the providers or a particular provider network that will best meet the needs of your team.
If you’d like to learn more about how to provide your team with high quality health benefits without losing money, talk to one of the experts at NY Small Health.