Is Self-Funding Right for Your Company?

As employers and increasingly, employees, have endured double-digit rate increases on comprehensive group insurance plans over the past decade, creative methods of controlling rates while maintaining benefits have come to the fore.

Partial Self-Funding

This cost saving strategy involves an employer purchasing a high deductible health plan (HDHP) for employees and then funding all or part of the deductible.

The employer immediately realizes huge savings in monthly premium outlay and limits their self-funding exposure by carefully defining the employee benefit under the deductible.

As it is statistically unusual for most employees to use a significant amount of care during the plan year, the very worst-case net cost scenario is typically equal to that of the employer staying on their old comprehensive plan.

Partial funding of the deductible can take many forms: It can be as simple as specifying a percentage of employer deductible subsidy or as sophisticated as creating a plan design under the deductible mimicking that of a comprehensive insurance plan. A third party administrator processes claims under the deductible out of an employer trust account for a reasonable administration fee. Employer net savings can reach up to 40% in some cases.

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