Consider Self‐Funding as an ACA strategy

With the introduction of Affordable Care Act (ACA) regulations and the steady increase of healthcare costs, it’s becoming more difficult to save money and control costs. Self-funding your Health Insurance plan may be a smart ACA strategy for your organization to consider.

Here are the four key advantages for self-funding:

Advantage #1 – Plan Design Freedom

The self-funded plan can be customized, adjusted or changed in endless ways – even in bargained environments. The employer receives utilization reports so trends can be detected that in-turn affect plan design decisions. This enables you to create a multi-year benefits strategy. Every year, as the plan is managed to better achieve the stated goals your savings increase.

Also, savings from disease management, wellness plans and other health-promoting strategies are fully realized with a self-funded plan and can lower costs in all areas. With fully-insured plans, these strategies often produce small or insignificant results.

Advantage #2 – Tax savings

In certain states there are no premium taxes on self-funded plans. You can also save on ACA taxes and fees (i.e. Medical Loss Ratio Rules, Annual Insurance Fees, Reinsurance Fees for 2015 and 2016 and Insurance Premium Restrictions) thus lowering your Health Insurance plan financial exposure.

Advantage #3 – Lower Administrative Costs

Self-funded Insurance plans administered through a Third Party Administrator are generally substantially less expensive than the costs charged by an insurance carrier.

Advantage #4 – Better Cash Flow

• Since the employer does not have to pre-pay for coverage (other than a monthly administration fee), funds are only required when claims are paid. This allows your organization – instead of the insurance company - to earn interest on the reserve, improving cash flow.
• The effective use of utilization reports will help forecast claims and insurance costs for the next year. They are appropriately forecasted allowing for better cash flow and benefit planning.

Self-funding takes more involvement on the part of the employer but the freedom to design and control spending outweighs the increased involvement.

Interested in learning more about self-funding? Ask your benefit advisor to include a self-funded alternative when you review your medical benefits. Also take every opportunity to learn more about self-funding from discussions with your benefit advisor, seminars, webinars, another school district or municipality, etc. Making an informed decision about self-funding is important to ensure that it’s the right option for you.

For additional details about which ACA requirements apply and don’t apply to a self-funded group, please download our legislative brief.