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Self-Funded Health Insurance Basics

Self-funded or self-insured health insurance plans can be completely owned by you as an employer, giving you more control and maximum flexibility. With a self-funded plan, you assume the financial risk and responsibility of providing health benefits to your employees, instead of transferring that risk to an insurance company. This allows you to payout claims to your employees only when they are incurred, rather than paying a fixed, recurring premium to the insurance company. Also, because you’re only paying for the healthcare costs of your own employees, there may be money left over at the end of the year that can be used for other business needs.

Some of the benefits to self-funding are:

  1. Reduced insurance overhead costs - Self-funded plans remove the risk charges set by insurance carriers

  2. No state premium taxes - self-funded programs aren’t subject to state premium taxes (resulting in savings of 2-3% of the premium dollar value)

  3. Nationwide consistency in plans - self-funded plans are subject only to federal governance, not state insurance laws

  4. Greater customization of health plans and benefits - You as an employer have full control of the health plans, from setting the cost-sharing limits to eligibility standards.

  5. Choice of claim administrator - With self-funding, you’re not tied to an insurance company to handle claims administration; you can choose between your own organization, an insurance company, or a third-party administrator.

The self-insured program, according to Aetna, requires employers to set aside a monthly amount that will cover expected medical costs of employees, administrative expenses, and doctor’s bills. From this pool of money, employees will be ‘reimbursed’ for their covered or eligible healthcare expenses. At the end of the year, the leftover money not used for insurance claims purposes is typically split between the insurance carrier and the employer.

NY Small Health can help you figure out if self-funded insurance plans are suited to your business or whether a fully-insured plan better meets your company’s needs. NY Small Health also partners with Aetna to provide you with transparent insurance information and plans.

Contact NYSH to find out more.

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