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Many small employers are self-funding - here's why

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Opportunity for small groups to minimize costs

Just thirteen percent of small employers are partially or completely self-funding their benefits plan, compared to 81 percent of large groups. In the past, self-funding was not an option for smaller employers; however, insurers are increasingly providing health plans with a self-funded option for small and mid-sized groups.

Why would employers want to move toward a self-funded plan?

In general, self-funded insurance plans provide employers with more transparency and control over their costs.

The alternative to a self-funded plan is a fully-funded, or fully-insured benefits plan. The major difference between the two is who operates the plan and who pays the claims. With self-funded insurance, the employer operates the plan and pays the claims, while the insurance company operates the plan and pays the claims for fully-funded insurance.

A major benefit for employers who have opted for self-insurance is the savings potential. Employers assume the financial risk in a self-insured plan, as they pay each claim rather than paying a fixed premium to the insurance carrier. That means they can also reap the financial benefit of low-claim years.

Additionally, self-funded plans give employers more control and flexibility over the plan design and free them from the uncertainty of annual rate increases with fully-funded insurance. They have more insight into variable claims costs and management, which can help better predict future healthcare costs and risks, ideally leveling out their benefits spend.

There are also blended options, where employers can take on less risk and still benefit in low-claim years while minimizing risk in high-claim years. 

 

BernieForms is a modern health form solution that allows brokers to streamline the distribution, collection and submission of health questionnaires - enabling brokers to provide more options and better advice to help employers pursue a self-funding strategy.

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