Self-Funded Insurance Plan - Explained
What is a Self-Funded Insurance Plan?
If you still have questions or prefer to get help directly from an agent, please submit a request.
We’ll get back to you as soon as possible.
- Marketing, Advertising, Sales & PR
- Accounting, Taxation, and Reporting
- Professionalism & Career Development
Law, Transactions, & Risk Management
Government, Legal System, Administrative Law, & Constitutional Law Legal Disputes - Civil & Criminal Law Agency Law HR, Employment, Labor, & Discrimination Business Entities, Corporate Governance & Ownership Business Transactions, Antitrust, & Securities Law Real Estate, Personal, & Intellectual Property Commercial Law: Contract, Payments, Security Interests, & Bankruptcy Consumer Protection Insurance & Risk Management Immigration Law Environmental Protection Law Inheritance, Estates, and Trusts
- Business Management & Operations
- Economics, Finance, & Analytics
What is a Self-Funded (Self-Insured) Plan?
A Self-Insured or Self-Funded plan refers to a situation where the employer takes on the financial risk for its employees with health care benefits. In plain terms, Self-Insured employers fund claims out-of-pocket as they are charged as against a Fully Insured Plan which entails paying a premium that has been pre-determined to an insurance carrier. Usually, a special trust fund is set up by a self-insured employer in a bid to earmark money for the payment of incurred claims. The money earmarked include corporate, as well as, employee contributions.
Back To: INSURANCE & RISK MANAGEMENT
What are Self-Funding Insurance Plans?
A third party administrator (TPA) refers to an entity responsible for processing or adjudicating claims for an employee benefit plan. A third party administrator may provide added services to an employer or employee benefit plan such as to contract for PPO services, collect premiums, provide utilization review of claims, and related ancillary services to operating the employee benefit plan. It is possible for Self-insured employers to either have an in-house administering of the claims or subcontracting the service to a third party administrator. There are various reasons employers pick self-insurance as a better alternative. The following are the major reasons: The employer can design the plan to meet its workforces health care needs as against purchasing an insurance policy that caters for a wide range of needs. The health plan reserves are controlled by the employer which enables interest income maximization. This refers to income which an insurance carrier will generate by investing premium dollars. The employer doesn't have to pay in advance for coverage, hence providing for better cash flow. Since self-insured health plans are controlled under federal law (ERISA), the employer does not abide by conflicting state health insurance regulations or benefit mandates. The employer is free from state health insurance premium taxes. Usually, these taxes are 2-3% of the premium dollar value. The employer can freely enter into a contract with the providers or provider network suitable to meet the employees health care needs. A self-insured plan is not the best option for all employers. Since a self-insured employer takes on the risk for the payment of its employees health care claim costs, it must have the financial resources to meet this requirement which could be unpredictable. Hence, small employers, as well as, other ones with poor cash flow discover self-insurance to be an option that isnt feasible. Note, however, that companies exist which have as little as twenty-five employees who maintain self-insured health plans that are viable. Employers can protect themselves against unforeseen, catastrophic claims. While the biggest employers have adequate financial reserves for covering almost any amount of health care expenses, the majority of self-insured employers purchase stop-loss insurance. This insurance type is purchased by these self-insured employers in order to reimburse them for claims that go beyond a certain dollar level. Self-funded group health plans are under every applicable federal law with the inclusion of Health Insurance Portability and Accountability Act (HIPAA), the Pregnancy Discrimination Act, the Americans with Disabilities Act (ADA), Employee Retirement Income Security Act (ERISA), the Age Discrimination in Employment Act, the Civil Rights Act, Consolidated Omnibus Budget Reconciliation Act (COBRA), and a number of budget reconciliation acts like Deficit Reduction Act (DEFRA), Economic Recovery Tax Act (ERTA), and as Tax Equity and Fiscal Responsibility Act (TEFRA).
- Insurance Law (Intro)
- What is insurance?
- Captive Agent
- Independent Agent
- Captive Insurance Company
- Combined Ratio
- Claims Adjuster
- Capital at Risk
- Assigned Risk
- Incurred But Not Reported
- Qualified Actuary
- Cession (Re-Insurance)
- Burning Cost Ratio
- What is an insurance contract?
- Accidental Means
- Anti-stacking Provisions
- What is an insurable interest?
- What are the common categorizations of insurance?
- National Association of Insurance Commissioners
- Insurance Regulatory Information System
- American Academy of Actuaries Definition
- American Association of Insurance Services Definition
- American Council of Life Insurance Definition
- American Insurance Association Definition
- American Risk and Insurance Association Definition
- LLoyd's of London
- Associate in Insurance Services (AIS) Definition
- Associate in Loss Control Management Definition
- Associate in Marine Insurance Management Definition
- Associate in Personal Insurance Definition
- Associate in Reinsurance (ARe) Definition
- Associate in Risk Management Definition
- Associate in Commercial Underwriting Definition
- Associate in Insurance Accounting and Finance Definition
- Associate in Surplus Lines Insurance Definition
- Chartered Insurance Professional Definition
- Chartered Life Underwriter Definition
- Chartered Property Casualty Underwriter Definition
- Vehicle insurancePrivate Passenger Auto Insurance Risk Profile
- Underinsured Motorist Coverage
- Uninsured Motorist Coverage
- Omnibus Clause
- Health Maintenance Organization
- Capitated Contract
- Point of Service Plan
- Children's Health Insurance Program
- Disability Insurance?
- Credit Disability Insurance
- Life Insurance?
- Cash Surrender Value
- Absolute Beneficiary
- Acceleration Life Insurance
- Accelerated Benefit
- Accelerated Option
- Accelerative Endowment
- Charitable Gift Life Insurance
- Incontestability Clause
- Waterfall Concept
- Assumed Interest Rate
- Clean Sheeting
- Hazard Insurance
- Homeowners, Renters, and Fire Insurance?
- Participating Community (Flood Insurance)
- Insurance Considerations for Business
- Business Liability Insurance
- Commercial General Liability
- Liability Risk Retention Act
- Excess Insurance and Umbrella Insurance Policy
- Business Interruption Insurance
- Key Person Insurance Definition
- Own-Occupation Policy
- Self-Funded Health Insurance Plan
- Basket Retention Policy
- Commercial Blanket Bond
- Alternative Risk Transfer Market Definition
- Commercial Property Casualty Market Index Survey
- What are the primary obligations of the insurer?
- Earned Premium
- Reservation of Rights Letter
- Collateral Source Rule
- What are the primary obligations of the insured?
- Insurance Premium
- Affidavit of Loss
- What is the general structure of an insurance contract?
- Ambiguity Principle
- Accommodation Line
- What are the common disputed provisions in an insurance contract?
- Absolute Exclusion
- All Risks Clause
- What is required for the termination of an insurance contract?
- Risk Management
- Professional Risk Manager
- Associate in Management (AIM)
- Financial Risk Manager
- Forecasting (Business)
- Objective Probability
- Unconditional Probability
- Enterprise Risk Management (ERM)
- Operational Risk
- Business Recovery Risk
- Political Risk
- Asset Protection
- Performance Bond
- Barra Risk Factor Analysis Definition
- Above Ground Risk (Mining Industry)
- Bumbershoot Policy (Maritime)
- Abandonment Clause (Boat or Vessel)
- Bobtail Liability Insurance (Trucking Industry)
- Anti-Indemnity Statute (Construction)