Self-Funding: Now A Viable Option for Small Groups
Our ERISA-based plans are built upon the longstanding tradition of self-funding - but this time in a way that allows these advantages to be attainable for small to mid-sized businesses.
With self-funding, employers fund and manage their own claims account. Claims are paid with the employer's own money instead of just insurance premiums. With our ERISA-based plans, part of the monthly premium is used cover the costs of the specific and aggregate stop loss coverage. The majority of the monthly premium goes to the group's claims fund and is paid out as claims are incurred during the plan year.
No Prepayment for Claims
All of the premium dollars set aside to fund the client’s claims fund are only paid out when claims are processed. The employer has the ability to build reserves in this fund based upon the group's claims experience.
Build Reserve / Surplus
When claims experience is lower than projected, self-funded plans can build reserves to help cover future costs or apply any surplus to offset any renewal rate increases. In a fully insured arrangement if there are savings, the insurer keeps those funds.
Lower Administrative Costs
Typically, self-funded plans offer sponsoring employers lower administrative costs than a fully insured equivalent. Keep in mind, with ERISA-based plans, often the PPO and PBM network access fees are also included in plan administrative costs.
Reduced Premium Taxes
With traditional self-funded plans, an employer only pay taxes on the reinsurance amount and not on the dollars used to fund the claims fund.
Custom Plan Designs
With both traditional self-funded and ERISA-based models, the employer has much greater flexibility to customize the benefits offered. Instead of the one-size-fits-all approach of the fully-insured market, ERISA-based programs give small to mid-sized employers greater opportunities to design the health plan in a way that works for them.
Flexibility with State Mandates
ERISA-based plans, being under the jurisdiction of the Department of Labor, offer greater flexibility when administering benefits to all employees regardless of location and allow the employer flexibility to avoid burdensome state mandates.
Third Party Administratiors (TPAs) that are involved in administering benefits for ERISA-based plans are uniquely adapted to get the best possible services for the dollar. By negotiating with multiple PBMs, PPO Networks and Case Management Companies, TPAs can work to ensure the most competitive pricing available, which translates to each sponsoring employer's bottom line.
Cost Control Strategies
ERISA-based plans set up the opportunity for a strategic approach to group benefits as a multi-year strategy. Each sponsoring employer benefits directly from favorable claims experience, managed care and population health management programs, and other cost control measures.