benefits of self funding
The flexibility of a self-funded plan
allows for more easily integrated cost-containment
measures. A self funded plan also provides advantages
from a cash flow standpoint in that it uses a
pay-as-you-go approach.
Benefits of
Self-Funding
-
Elimination of Most
Premium Tax:
There is no premium tax on the self-insured claim
expenditures. Premium tax is applied only to the
stop-loss premium, which is a fraction of a fully
insured premium.
-
Lower Cost of
Administration:
Employers find that administrative costs for a
self-insured program administered through a TPA are
significantly lower than those included in the
premium by an insurance carrier or HMO.
-
Carrier Profit Margin
and Risk Charge Eliminated:
The profit margin and risk charge of an insurance
carrier/HMO are eliminated for the bulk of the plan.
-
Claims/Administration:
The TPA should provide fast, efficient claims
service. The employer should be provided an
electronic enrollment option. ID cards should be
provided within 72 hours of request.
-
Customer Service:
The employee should have access to a toll-free
telephone number and a dedicated customer service
team. Claims and eligibility information should be
available over the Internet.
-
Cash Flow Benefit:
The employer's cash flow is improved when money
formerly held by the insurance carrier in the form
of reserves, for unreported and pending claims, is
freed for use by the employer.
-
National Provider
Network:
The TPA should offer a national integrated program
of PPO networks for multi-state employers.
-
Control of Plan Design:
The employer has complete flexibility in determining
the appropriate plan design to meet the needs of the
employer and employees. The employer can redesign
its plan at any time.
-
Mandatory Benefits are
Optional:
State regulations mandating costly benefits are
optional because self-funding is regulated by
federal legislation only.
-
Cost Reporting:
The TPA should provide a monthly detailed reporting
of costs, by department or location, and by type of
medical service. Utilization and lag reports should
also be available. Fund disbursement journals
should be provided electronically.
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