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Your Guide to the Pros and Cons of Self-Funded Health Insurance Plans

With the costs of employer-sponsored health plans continuing to rise, more and more companies are looking to self-funded insurance as an option. But how do you know if this is a good long-term solution for your business and its employees? Like all health insurance plans, self-funding has pros and cons to carefully weigh when deciding what’s best for you.

Pros

Choices

Plans aren’t One Size Fits All.

One of the best features of self-funded insurance plans is flexibility. You can choose what you cover based on the needs of your business and your employees. This option puts you in the driver’s seat. You don’t have to pay for services under a pre-packaged blanket policy that your employees won’t use.

With Responsibility Comes Reward.

When companies take on the responsibility and risk of a self-funded plan, they stand to save. Self-funded is a financial solution that allows employers to pay only for claims that are actually incurred. If total claims costs are lower than expected, you retain the savings and can earn interest on your reserve. Stop-loss insurance mitigates the financial risk of a self-funded plan by putting a limit on the financial impact claims can have on your company.

Information to Help you Manage.

The transparency that a self-funded plan offers allows employers to see exactly where their health care spending is going. A strong third party administrative partner will provide in-depth reporting, data analysis and strategic recommendations that will help to optimize your benefits.

Cons

It’s Not for Everyone.

Self-funding may not be right for your organization. Managing a self-funded health plan requires leadership engagement and an experienced partner. As a funding solution for benefits, self-funded is not a set it and forget it plan.

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Cash Flow

There are certain financial resources needed to pay the claims costs. Fluctuations in actual claims can significantly impact your company’s cash flow. Companies with poor cash flow may find self-funded insurance is not the solution for them. On the flip side, transparency in reporting helps forecast claims costs, offering for the potential for better cash flow and benefit planning.

Cost Savings are Not Guaranteed.

Choosing to self-fund your health plan should be viewed as a long-term strategy and not a quick fix. Savings are not always guaranteed or immediate. The savings potential comes over time as your benefit plan is optimized and utilization of health care services is better managed.

Switching to a self-funded insurance plan may be a smart decision. Talk to an experienced consultant or broker to make sure you are aware of all the pros and cons. Their assistance can help you decide if self-funded insurance is right for you and your employees. Contact the professionals at MedCost to learn how we can help employers achieve the best balance of cost and care.