Stop Loss
Self-Funding Advantages
What are the advantages of self-funding?
| FULLY INSURED | SELF-FUNDED | |
|---|---|---|
| Risk | Insurer | Employer, but can be controlled with Stop Loss insurance |
| Claims | Paid by insurer | Paid by employer |
| Data | Not readily available | Monthly reporting shows where claim dollars are going |
| Ability to manage risk | Limited | Can identify and manage cost drivers |
| Cash flow | Pre-pay premium each month | Pay for claims only when they occur |
| Plan design | Limited; controlled by insurer | Flexible; controlled by employer |
| Regulatory oversight | State | Federal |
| State-mandated benefits | Yes | Mostly eliminated |
| Consistency across state lines | No | Yes; can have one plan design for employees in multiple states |
| Premium taxes | 1.5% to 3.5%, depending on state | Lower; based only on Stop Loss premium |
| Time requirement | Low to medium | Higher administrative responsibility |
| Outlook | Short term; year-to-year | Long term |