MADISON, Wis. (11/27/13)--A new white paper from the CUNA HR/TD Council explores the viability of self-funded employee healthcare plans.
The paper, "Health Insurance Plan Options: Self-Funded and Fully Insured," explores how organizations of all sizes are turning to self-funded plans to reduce and manage their health care costs and improve cash flow while still delivering the health coverage they desire for their work force.
In self-funded plans, the employer takes on the financial risk of funding its health plan from its assets and becomes responsible for managing and administering the benefit plan.
Self-funded plans are governed by the Employer Retirement Income Security Act (ERISA) and appeal to employers because of the greater flexibility that comes with tailoring the plan to their needs with fewer state-mandated features.
Among the advantages the paper cites for self-funded employee healthcare plans:
Control. Advocates for self-insurance say it's the difference between managing and leveraging the credit union's assets versus just paying premiums. The organization also assumes control of the specific health needs of its employee population.
Potentially lower costs. An organization can save 10%-25% of costs by going to a self-funded benefits plan, according to the Self-Insurance Institute of America Inc., the largest U.S. self-funding trade group.
Direct benefit. With a self-funded health plan, the employer reaps the benefits of its investment when plan results beat expectations.
Use of employee health data. With self-insurance, an employer can collect claims data that can pinpoint health issues that are driving claims costs and provide focused wellness solutions. That means savings because the credit union can target health and wellness efforts toward actual employee experience.
Customization. The employer can set premiums based on its employee claims history and adjust the plan in other ways to cut costs. If claims are lower than anticipated, the employer can invest any savings and earn interest.
Exemption from most state insurance regulations. Plan sponsors and employers have self-funded their medical plans for more than 30 years, a result of the passage of ERISA. ERISA exempts self-funded plans from state insurance laws including reserve requirements, mandated benefits, premium taxes, and consumer protection regulations. As a result, an employer can make available uniform, targeted benefits to employees no matter what state they work.
Greater flexibility in how the benefits are designed. With a self-funded plan, the organization is basically unraveling or unpacking what it has in a traditional outside insurance company's health plan. It can examine each aspect of what goes into health coverage and decide how to proceed.
To download the paper, use the link.