Why Self Fund?

Self-funded health care is a self-insurance arrangement whereby an employer provides health or disability benefits to employees using its own funds. This is different from fully insured plans where the employer contracts an insurance company to cover the employees and dependents. In self-funded health care, the employer assumes the direct risk for payment of the claims for benefits. The terms of eligibility and covered benefits are set forth in a plan document which includes provisions similar to those found in a typical group health insurance policy.

Risk Mitigation

Many employers seek to mitigate the financial risk of self-funding claims under the plan by purchasing stop-loss insurance from an insurance carrier. These policies typically provide for risk retention limitations both on a specific claim and aggregate claims basis. Specific stop-loss protects the plan from high claims incurred by individuals within a chosen period of time. Aggregate stop-loss protects the plan from the accumulated total claims incurred by everyone covered by the plan within a chosen period of time. For most companies, stop-loss insurance is instrumental in protecting against higher than expected claims on both an individual and a total group basis. Superior will work with you and your broker to determine the proper levels of stop-loss coverage for your unique situation.

Third Party Administrators

Most employers interested in self-funding find it necessary to contract with a third party for assistance in claims adjudication and payment. Third Party Administrators (TPAs) provide these and other services, such as access to preferred provider networks, prescription drug card programs, utilization reviews and the stop-loss insurance market. Working with a TPA can also provide significant advantages. Perhaps the biggest advantage of self-funding your plans is transparency of claims data. Self-funded employers who contract with a TPA receive a monthly report detailing medical claims and pharmacy costs. Knowing this information becomes instrumental in controlling costs by shifting buying patterns. Other advantages include benefit plan flexibility and potential financial savings.

Other Advantages

  • Earn interest from holding your claim reserves
  • Flexibility
  • Control over how funds are distributed
  • Transparency