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The Advantages Of Self Funded Insurance Plans

March 1, 2021, by New City Insurance

Businesswoman looking at self funded insurance optionsSelf-funded insurance plans, also referred to as self-insurance, are a popular type of health care plan in which an employer takes on all or most of the cost of benefit claims. While the employer is responsible for paying the claims, a third-party administrator (TPA) processes them on the company’s behalf.
Self-insured employers pay claims out-of-pocket as they occur instead of paying the insurance company a predetermined premium. Money is generally earmarked in a special trust set up by the self-insured employer to pay incurred claims.

Self-Funded Insurance For Your Business

Self-funded insurance offers a wide range of benefits to businesses. However, it is not right for all businesses. Self-funding is more common among larger businesses due to the level of risk involved. Many smaller businesses do not realize that stop-loss insurance is available to cover any catastrophic or unexpected healthcare costs. For both small and large businesses, self-funded insurance can provide greater flexibility and money-saving benefits.

The Benefits Of A Self-Funded Insurance Policy

Businessmen Shaking hands with a owner who choose a self funded insuranceThere is no one-size-fits-all approach to reducing health care costs. However, self-funded insurance policies can be part of a comprehensive strategy for reducing medical costs. Self-funded insurance is more flexible than traditional, fully-insured health plans and is subject to fewer regulations. Businesses also have the opportunity to customize their health plan to meet the unique needs of their company.
Here is a closer look at some of the other key benefits that insurance can bring to modern businesses:

Employer Has More Control Over the Plan

Self-funded health insurance plans differ considerably from traditional plans by allowing businesses the opportunity to maintain control over the benefits they receive. With a traditional health insurance plan, a business would be forced to choose from a pre-established health plan containing benefits that no one will ever use. However, a self-funded plan can be customized to meet employees’ unique needs, resulting in minimal waste.

Plan Is Not Subject To Insurance Laws And Mandates

Companies that choose to self-fund are not subject to most traditional state insurance laws. Self-insured health plans are exempt from many ACA requirements as the employer assumes the financial risk of providing employees with health care benefits. Self-insured plans are, however, governed by federal laws that are determined by the Department of Labor. This includes the Employee Retirement Income Security Act (ERISA) of 1974 that does not require self-funded employers to comply with state insurance laws and mandates.

Funds Are Retained When Claims Are Low

Setting up self-funded insurance can also have certain financial advantages, such as improved cash flow when employers only pay for claims that are actually incurred. This differs from a fully-funded health plan in which an employer would pay the full premium regardless of the actual claims. Premiums also include a reserved amount to help cover unexpected or catastrophic claims. However, the employer does not receive a refund if these claims never occur. When claims under a self-funded insurance policy are lower than expected, the employer retains the funds.

Less Costly Than Other Options

Cost savings is one of the biggest advantages of self-funded insurance. Suppose a workforce is relatively healthy and does not visit the doctor very often. In that case, an employer’s health care costs will be considerably lower than what they would be under a fully-insured policy. Self-funded employers can also avoid other expenses, such as premium taxes, which are imposed by each state.

Data Transparency

young professionals looking up what a self funded insurance plan is to know what it offers Insurance companies often refuse to share price data with employers as this information is considered ‘proprietary trade secrets.’ However, these rules do not apply to self-funded employers. In fact, businesses with self-funded plans can use price transparency to improve contracting with health care providers. With this information, employers are able to determine if they are overpaying for certain medical services and are better equipped to negotiate a fair price for services. In other words, self-funded employers are paving the way for more affordable health care.

In-Depth Reporting

Self-funding can also result in other key benefits for businesses, such as in-depth reporting. Self-funded reports help employers better understand where they stand in terms of meeting the health care needs of employees. With this information, they are able to make more strategic decisions about their self-funded plan. Customized plans can also be created to meet the ever-evolving needs of the modern workforce.

Get Started With Your Self-Funded Insurance Plan

Although there are many advantages of this kind of insurance, it is also important to be aware of the potential downsides. Employers face a higher risk of losses due to extraordinary claims, and annual expenses can be unpredictable, resulting in potential cashflow issues. There is also a higher risk of in-house abuse or fraud. Speak with an experienced insurance professional today at New City Insurance to learn more about the advantages of insurance plans.

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Filed Under: Insurance,  Self Funding

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Carol Zhang
Carol Zhang
04:29 06 Mar 22
As a rapidly expanding national media organization, the employee benefits strategy and administration that New City has provided us during our growth has been invaluable. They have been proactive about informing us of the different benefit strategies available to us as we grow as well as managing the additional compliance laws and reporting requirements at each stage of our growth.
Claudia Villalobos
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20:14 03 Mar 22
New City Insurance made navigating through all the health insurances super EASY. Their documents are highly informative, professional, and easy to work with. Thank you for making the process of choosing a health plan so simple. You guys are THE BEST!
Philippe Salas
Philippe Salas
17:02 22 Feb 22
I never expected to have a good time talking to an insurance salesman, but let me tell you Brendan was quite the treat. He was very helpful explaining the options and has a wonderful sense of humor. I hope to speak with him every time I call.
Jennifer Polito
Jennifer Polito
17:15 09 Feb 22
Super easy enrollment process. Fast and friendly customer service. If you are looking for an insurance company that is there for you every step of the way I highly recommend New City Insurance.
Rocky Salas
Rocky Salas
23:46 07 Jan 22
So friendly, I hope to speak to him again in all my future insurance needs.
Rocky Salas
Rocky Salas
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So friendly and soft spoken. I hope to speak to him again in all my future insurance needs.
Jose Brena
Jose Brena
13:20 06 Jan 22
Eric Calciano has been extremely helpful in finding and selecting the right insurance coverage for our company. With many options out there Eric assisted us on getting a low cost provider saving more than 20% than from our competitors and providing excellent coverage for our employees.
Anastasia Beaverhousen
Anastasia Beaverhousen
17:05 28 Dec 21
Signing up for insurance was quick and easy. Felicity Sundsboe
SFCC
SFCC
22:08 29 Nov 21
Jeff Stoltey and his team provide excellent customer service. Jeff has always provided my company SFCC with straightforward options. I went to a larger insurance company only to RUN BACK to Jeff at New City Insurance. I recommend them to anyone needing insurance without hesitation.
Kevin Luby
Kevin Luby
19:13 22 Oct 21
Quick, easy & informative. We were able to secure quality insurance for our small business on a tight deadline. Thanks for the help New City.
Theresa Ruybol
Theresa Ruybol
19:30 01 Jul 21
Eric was so great with us. He was very patient and kind as we are a newer smaller organization who is growing rapidly. With that said, we had made our inquiry, he had great rapid response and mostly had to wait on me. Any request that we made and/or questions we had, he was great answering and helping us understand. Then when we were ready for all documents and to move forward, Brendan helped with getting that together and the two of them worked their magic on New City's end to notify me of what was needed, assist me in that process and confirming that all was complete and approved for the coverage. I just want to say thank you all again so much, as insurance has always been confusing to me, and you all made that process go a lot smoother.Thank you
Andrea Ordendorff
Andrea Ordendorff
21:06 07 May 21
I've been working with both Clayton and Brendan for well over a year. As the purchase of our dental practice was delayed well over 14 months they both patiently supported me and continued to make themselves available. When we were officially ready to sign up they made the whole process seamless and super easy. This team is highly knowledgeable, professional, supportive, and efficient! I can't thank them enough for everything they've done.
T W
T W
22:32 30 Aug 20
I love New City Insurance. I never had a good experience dealing with insurance brokers until I started working with Brendan. He’s awesome! He is patient with me and takes the time to answer all my questions. I’m very grateful for all his help and hard work!
Mary Jane Deyette
Mary Jane Deyette
00:57 11 May 20
Jeff Stoltey is so awesome...even thru my company had only two employees, he took the time each year to research and find the best plan for us. The only reason I am leaving New City Insurance is because we no longer have any employees. Thank you Jeff
Alma Ortiz
Alma Ortiz
22:25 23 Feb 20
Brendan was awesome! I couldn't figure out how to pick my plan and he returned my call on a weekend to help me. Outstansing service!
jessica kavanagh
jessica kavanagh
19:53 13 Feb 20
Brendan was so helpful I definitely recommend him if you’re in need of good help and getting it done promptly. Thankyou so much again.
Tricia DeYoung
Tricia DeYoung
19:49 13 Feb 20
I was very thankful I inquired about this info. with Brendan. He was very helpful so I understand the benefits available much better now. Thank you Brendan.
B Bayer
B Bayer
17:43 24 Sep 19
NCI handled almost everything from start to finish. Clayton and Brendan made the plans easy to understand and walked me through the application process. They got me my ID numbers before my cards arrived so that I could keep an appointment I had already scheduled. My last broker wouldn't have done that. 5 stars!
Jessica Lehr
Jessica Lehr
03:36 07 Jun 19
Our staff was interested in a health plan, but we didn't know how beneficial a solid employee benefits package would be for our business to expand. We'd lose prospective employees because they had more options for their medical insurance which was sometimes more valuable than more pay. The New City team was amazing and gave us as many affordable options as possible so that everyone had their needs met.
Mike McClay
Mike McClay
19:36 03 May 19
My employer uses New City as their insurance broker, and I'm always amazed when I call in for assistance by how knowledgeable and attentive their staff is with my requests. Their online benefits platform makes selecting insurance plans pretty darn easy. I would highly recommend their services.
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