Employers with fewer than 100 eligible employees have often avoided self-funding their group health insurance programs because they’ve been afraid of the risk. However, with the rising costs of employee health benefits, many employers are turning to self-funding to get control of spending.
There are four main components of any group health plan.
- TPA or Carrier: Responsible for paying claims
- Network: Includes the providers and physicians accessible for care
- Stop-Loss/Reinsurance: Ensures that large risks are insured
- Pharmacy: Manages the prescription drug aspect of the plan
With a fully insured plan, the insurance company manages all the components and employers pay a fixed premium over 12 months. The carrier assumes the risk and manages claims. They profit during periods of low risk and run a deficit when claims exceed premiums paid. Using this model, employers with less than 100 enrolled employees do not typically have access to crucial data for making informed decisions.
With a self-funded program, employers design the plan, fund employee medical claims and pay for administration of the program using an insurance company or third-party vendor.
The employer also communicates plan details to employees and receives claims information about their group, which they can use to create programs to better manage costs.
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