Self-Insured Health Plan
More small and mid-sized employers are exploring the shift from fully insured to self-insured employee health plans. While the potential savings can be appealing, it’s crucial to understand the true cost and complexity involved.
Why Some Employers Choose to Self-Insure
Potential Cost Savings: Retain savings when claims are lower than expected.
Plan Flexibility: Customize benefits, networks, and funding approaches.
Data Transparency: Gain access to claim-level data to make informed decisions.
Challenges & Hidden Costs
Claims Volatility: Unpredictable costs can hit budgets hard—but stop-loss insurance can help mitigate risk.
Administrative Burden: Managing TPAs, PBMs, stop-loss providers, and others requires more internal resources.
Compliance & Fiduciary Risk: Employers assume responsibility for ERISA and other legal requirements.
Operational Inefficiencies: Without a strong admin process, the cost advantage may be lost.
Thinking About Making the Switch?
Have you accounted for all the key components of a self-insured plan?
Expected claim (benefit) costs
Claim reserves (for IBNR and runout)
Stop Loss insurance premiums
TPA or ASO fees
Pharmacy, wellness, or care management vendor costs
Consulting, actuarial, and legal support
HR time required to manage third-party relationships
Alternative options, like working with an MGU instead of coordinating multiple vendors
Compare Fully Insured vs. Self-Insured Costs Side by Side
A thorough cost comparison should factor in both the direct and indirect expenses. Sometimes, a hybrid approach like level funding offers the best of both worlds - plan flexibility with more predictability and risk protection.
Are you considering moving to a self-funded model? Let’s talk through whether it’s the right move based on your size, risk tolerance, and goals.
