The strength and success of self-funded plans over the past several decades is tied to personalization in plan design for each workforce and personalized services by independent/entrepreneurial-minded TPA firms.
With this model, every health plan is customized to the company and its workforce, while also complying with the federal requirements – a win-win for employers and employees. Self-funded plans are just the opposite of standard policies offered through insurance companies. They are designed to include the employee benefits and health coverage solutions which are considered to be the most necessary and beneficial to plan participants. They also take into account the administrative needs of each company as well as government compliance.
The ability to tailor health plan options to its employee groups even enables public employers to more readily negotiate with different unions. Public employers frequently have a number of unions to bargain with and a self-funded plan gives them the flexibility to do so. These plans provide the ability to bargain for the benefits each union wants and the ones employers can afford. They also give employers the ability to negotiate with different unions at different times instead of all at policy renewal time which is the case with a fully-insured plan.
Consider these examples:
Both of these employee benefits are very specific to each industry and would only apply to a very small percentage of plans – and thus would typically not be included in prepackaged fully insured plans. That’s the advantage of self-funding. Employers are able to custom-build an employee benefit program that fits the individual requirements of their workforce and adapt these benefits over time.
To tailor self-funded plans, employers will often partner with a third party administrator (TPA), but the final say on all benefit-related decisions remains in their own hands. This can make a huge difference as plan spending and health coverage are focused accordingly and the overall group benefits plan winds up being much more cost-effective and beneficial to the plan participants. The independent-thinking TPA brings expertise and experience from many plans with knowledge of what works.
Every business or public entity has different needs based on the populations it employs. Self-funding allows companies to narrow in on the group benefits that make most sense for their staff and work with a TPA to build the appropriate health plan at a reasonable price.