Why Self-Fund a Medical Plan?
Self-funded medical plans can make great sense for employers large and small who are facing escalating premiums as a result of health care reform. Here are just a few of the benefits of self-funding:
Premiums are taxable in most states at about 2.5%. With self-funding, an employer would only pay tax on its stop loss premium, typically about 10% of health care expenses. By comparison, the employer would pay tax on 100% of its fully insured premium. Plus, self-funded medical plans are exempt from an Affordable Care Act fee that increased premiums on fully insured plans by 2-3%.*
Employers save when claims are lower than expected. Plus, there’s a cap on all claims provided by their aggregate coverage.
Better cash flow
Employers pay as they go, only for the medical care that employees actually use. As a result, an employer can have greater cash flow on a monthly basis — money that can be invested in other areas.
The importance of stop loss insurance
Working with an experienced, financially sound insurance company, an employer can take advantage of the benefits of self-funding, while mitigating the financial risk if claims are higher than expected.