Self funded health insurance is a plan where an employer will pay out-of-pocket for claims as they happen, as opposed to paying a premium to an insurance carrier for a fully insured plan. Typically, an employer will set aside funds to pay for claims as they arise, which could be a combination of corporate and employee contributions, which can help improve cash flow. Not having to ‘pre-pay’ for a fully insured plan allows an employer to maximize interest income while having more control over health plan reserves.
Self funded health insurance plans also provide employers the ability to customize their care to meet the needs of their employees. Often times, fully insured plans provide very little flexibility. The obvious risk of a self funded health insurance plan is an uncontrollable high dollar claim, but this can be mitigated with stop-loss insurance, which limits the maximum out-of-pocket disbursement.
Many small businesses come to us for programs that break apart from health insurance community-rating. One product with which we are experts is a VEBA structure that leverages a captive.
This program pools many smaller employers together and creates a claims environment that they could not participate with at a traditional insurance company.