In a self-insured (also known as self-funded) employee benefits program, the employer assumes financial risk for providing health care benefits. Essentially, this means that you operate your own insurance company with bundled or unbundled providers. Premiums are collected from the employee pool, the way that they are under a traditional insurance plan, and then fixed and variable costs are paid by the employer.
Variable = The cost of claims for medical, dental, vision services, etc.
Fixed = All costs not associated with claims including but not limited to claims administration, network costs, actuary fees, auditor fees, reinsurance, etc.
The easiest way to look at this is to think of your employee benefits package as a house. If a lightbulb burns out (issues are experienced with a medical or dental or vision provider), you would have to sell the entire house to replace it should you be in a bundled plan (like traditional insurance). In an unbundled plan, where you hand-select your individual service providers, you can simply replace the lightbulb. ECA Inc. helps you navigate through these decisions with objective input on the advantages and disadvantages of bundled and unbundled packages as well as all service provider options.
There are many advantages to participating in a self-funded employee benefits plan.
- You get a “seat at the table” which translates into personal control over benefits and costs
- Access to more thorough claims data
- Guidance and ability to appeal denied claims
- Reduction in operating expenses
- Flexible benefits to attract/retain staff
- Network strength and discounts
- Reduced fluctuations from insurance cycle
- Money in good years balances bad
Self-insured benefits plan are strictly regulated to ensure proper formation and execution. Some of these regulations include:
- Formation per ARS 11-952 and 11-952.01
- Filed with Department of Insurance (DOI)
- Financial audit every year
- Subject to DOI examination every 5 years
Self-funded Insurance Pools or Trusts are governed by Board of Trustees that is typically comprised of one Trustee and one Alternate Trustee from each member entity. The Trustees are required to attend quarterly as well as annual (renewal) meetings.