Self-Funded Programs

A self-funded program is one in which the business pays the actual claims and essentially assumes the role of the insurance carrier. More common with larger companies — those with at least a couple hundred employees — the self-funded company retains the risk of paying for their employees’ health care themselves.

With healthy employees and few medical expenses, the self-funded company will immediately realize a positive impact on overall health care costs. On the other hand, unhealthy employees with surprise medical expenses, could become very costly. Self-funded companies often carry stop-loss insurance to reduce the risk associated with these surprise medical expenses.

An increasingly popular version of self-funding can be found in level-funded plans. Level funded plans have less risk than a self-funded plan, but offer some of the upside by sharing in the profits. They’re a nice middle ground between fully insured traditional plans and the self-funded plans mentioned here.

Self-Funded Programs

  • Improved cash flow, as claims are paid in arrears, but varies based on claims experience; threat of extreme fluctuations in the event of catastrophic claims.
  • Without an accompanying stop loss policy, fully exposed to any/all claims.
  • Accompanying stop loss policy can limit exposure to catastrophic claims, but re-introduces the threat of wild premium increases and lasers.
  • Gain access to granular data, but may lack the expertise needed to make it actionable.
  • Limited access to cost-containment programs typically only available to large groups – there’s no leverage by size.
  • Fewer taxes and fees.

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ThinkTank Insurance Partners, Inc.
18521 Spring Creek Rd Unit B.
Tinley Park, IL 60477
(708) 277-9023

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