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Savings that Stay with Health Plans#
Eliminating Inflated, Pre-Set Rates#
In a fully insured health plan, employers are paying a set annual rate that’s determined by the carrier. A big problem with this? If the group’s total health claim costs don’t reach the amount charged by year’s end, the company isn’t credited the difference … it doesn’t see those savings.
This is not the case with the self-funded structure. Any money that is saved throughout the year stays with the health plan to be used to pay for future costs. Health claims are paid as they are incurred, giving both private sector and public employers more control of where their plan dollars are going and how much is being disbursed.
Since self-funding affords employers the opportunity to save money, businesses can actually reserve funds for leaner budgetary years – a situation sometimes more keenly felt by public employers.
Benefit Administration Fees at a Fraction of the Cost#
Unlike most fully insured plans, there are no hidden fees or commissions built into the rates for self-funded plans. As the main law regulating these health insurance plans, ERISA prohibits this with its strict transparency and reporting requirements. The fees negotiated and paid to a third party administrator (TPA) must be clearly outlined when employers choose the services for their customized employee benefit programs.
In summary, self-funded plans that are well-designed and well-executed can make good financial sense for many private- and public-sector businesses for the following reasons:
- self-funded plans aren’t inflated with extra fees or hidden costs
- self-funded insurance eliminates standard, pre-paid rates and focuses on actual costs
- self-funded plans allow employers to enjoy the benefit of any savings they realize through plan design