What is a self-funded health plan?
Businesses that are seeking to provide health insurance for their employees are increasingly trying to control their costs while improving flexibility. One way they may be able to do so is through self-funded employee health insurance plans. A self-funded plan is one in which the business or employer itself funds, manages, and administers the health benefits of the plan. A self-funded plan is governed by federal rather than state law.
Employers who choose self-funded plans are often able to customize plans to their employees’ needs without having to meet specific state laws. The employer assumes control over the administration and funding of the plan as well as the risk and liability. In a traditional insurance model, the insurance company assumes the risk and administers the plan.
A business that chooses self-funded health coverage can purchase insurance on its own to protect the business in the case of excessive claims. This insurance is called employer stop-loss coverage. This plan will protect against catastrophic health claims, expensive chronic health conditions, and other high dollar claims.
Self-funding is extremely common among larger employers and less common among smaller business. However, switching to a self-funded insurance model does not have to be an all-or-nothing approach. In fact, even small businesses can take advantage of the benefits of self-funding by continuing third-party coverage of some benefits, such as dental or mental health plans, while self-funding their medical plans.
Just as with personal health insurance, no one insurance solution will be right for every business or employer. Each business will need to carefully assess its needs and the needs of its employees, as well as the benefits and drawbacks of self-funding, before making its final decision.
Talking to one of our qualified insurance professionals can provide you with the information you need to make the best decision for your company.
Source: Los Angeles Health Coverage
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