Moving to self-funding is an ACA strategy that many schools and local governmental employers are embracing in order to save money and control costs. When using a self-funded plan, employers assume the liability and risk associated with uncertain healthcare costs in exchange for a number of significant financial benefits. To protect against unpredictable or above-average claims, the organization purchases stop-loss coverage as a way to limit risk. The stop-loss provider pays any claims higher than that pre-set amount.
Key Advantages
Here are four key advantages for self-funding:
- Plan Design Freedom: Utilization reports can help you create a multi-year benefits strategy plan that can be customized, adjusted and changed in endless ways.
- Tax Savings: In certain states, there are no premium taxes on self-funded plans. You can also save on ACA taxes and fees including Medical Loss Ratio Rules, Annual Insurance Fees, Reinsurance Fees for 2015-16 and Insurance Premium Reductions.
- Lower Administrative Costs: Self-funded plans administered through a third party administrator are usually less expensive than through the insurance carrier.
- Better Cash Flow: Funds are only required when claims are paid. This allows your organization – instead of the insurance company – to earn interest on the reserve. Also utilization reports can help forecast claims and insurance costs for next year, allowing for better cash flow.
For more information, watch our video.