Benefits of Self Funded Insurance: Taking Control of Your Health Care Investment

Health care costs continue to rise, making it harder for employers to provide quality health care benefits without breaking the bank. Self funded insurance gives businesses a practical alternative to traditional insurance plans by putting control back in your hands while delivering real savings. The benefits of self funded insurance extend beyond just cost control, they include plan flexibility, data transparency, and customized solutions tailored to your workforce. Here’s how self funding works and why it might be the right choice for your employee benefits strategy:

How Self Funded Health Plans Work

Self funding puts employers in the driver’s seat of their health care benefits, creating an approach that works with business goals while taking better care of employees. Instead of paying premiums to an insurance carrier, you maintain control of your health care dollars:

Self Funded Health Plans Explained

In a self funded health plan, the employer assumes direct responsibility for employee health care costs instead of paying fixed premiums to an insurance carrier. This arrangement means paying for actual health care expenses as they occur rather than pre-paying for anticipated costs through premiums. The employer establishes a dedicated fund from which claims are paid, placing them in control of both health plan design and financial management.

Find out how the right employee benefits insurance can protect your team and predict your budget.

Protection Without the Risk

Self funded plans include stop-loss insurance that activates when claims exceed preset thresholds. This protection creates a safety net for your benefits program:

• Catastrophic Claim Protection: Shield your company from the financial impact of unexpected high-dollar claims.
• Downside Preservation: Keep the savings that would otherwise become insurance carrier profits when claims run below projections.
• Coverage Options: Choose from individual-specific or aggregate protection based on your risk management strategy.
• Risk Customization: Tailor protection levels based on your organization’s financial resources and risk comfort.
• Financial Security: Eliminate concerns about unlimited liability while maintaining self-funding advantages.

See the differences between self funded insurance vs fully insured plans with a side-by-side cost comparison tailored to your business.

Third Party Administrators: Your Benefits Management Team

Self funded plans work best with skilled third-party administrators handling the behind-the-scenes work. These specialized partners take care of processing claims, answering employee questions, maintaining compliance, and delivering clear insights on plan performance. By eliminating insurance carrier overhead, they help you create a more cost-effective and responsive benefits program that truly meets your employees’ needs.

Financial Advantages That Strengthen Your Bottom Line

The financial benefits of transitioning to self-funding extend far beyond basic premium savings, offering advantages that positively impact overall business performance:

Cash Flow Optimization

Self funded plans deliver meaningful cash flow advantages compared to fully insured options. Rather than paying premiums in advance, organizations maintain their reserves and pay claims as incurred. Optimizing cash flow preserves working capital and can generate interest on reserved funds. When claims run lower than anticipated, those savings remain with the employer rather than becoming insurance carrier profits.

Compliance Benefits and Tax Advantages

Self funded health plans operate under the Employee Retirement Income Security Act rather than state insurance regulations, giving employers meaningful financial and administrative benefits:

• Premium Tax Exemption: Avoid state-imposed taxes that typically add 2-4% to fully insured premiums.
• Multi-State Consistency: Maintain uniform benefits across state lines without navigating different regulatory requirements.
• Tax-Advantaged Savings: Create potential tax benefits for both the business and employees through proper plan structure.
• Design Freedom: Build plans based on workforce needs rather than prescribed state benefit mandates.

Administrative Cost Reduction

Traditional fully insured plans include numerous hidden costs embedded within premiums that fund carrier profits, administrative expenses, and reserves. Self funded plans eliminate many of these markup costs, typically reducing administrative expenses compared to fully insured plans. Organizations can realize immediate savings that enhance profitability without the premium taxes that apply to fully insured plans in many states.

Tailored Plan Design That Reflects Your Priorities

The most powerful advantage of self-funding lies in the freedom to create health plans that truly reflect organizational values and meet workforce needs:

Employee-Centered Plan Architecture

Self-funding grants organizations the ability to design health plans specifically tailored to their employee population’s unique needs and health profiles. This level of customization exceeds what’s possible with fully insured plans, enabling:

• Condition-Specific Benefits: Create coverage that addresses health issues most common in your specific workforce.
• Wellness Incentives: Develop programs that reward employees for healthy behaviors and preventive care participation.
• Cost Containment Solutions: Target high-expense areas with specialized approaches that maintain quality while reducing spend.
• Flexible Plan Evolution: Adjust coverage based on actual utilization data rather than insurance carrier limitations.

Data Insights That Drive Better Benefits Decisions

With self funded plans, you gain access to detailed claims information that insurance carriers rarely share with fully insured clients. This valuable data shows exactly how your health care dollars are being spent, revealing which conditions are most common among your employees, where your biggest expenses occur, and which providers deliver the best value. Armed with this information, you can make smarter decisions about plan design, target wellness programs to address specific health issues, and measure the real impact of your benefits initiatives—all while protecting the privacy of individual employees.

Provider Network Customization

Self funded plans offer exceptional flexibility in designing provider networks that balance quality care, accessibility, and cost management. Organizations can:

• Direct Provider Contracting: Establish relationships with high-performance health care providers for bundled services at negotiated rates.
• Centers of Excellence: Connect employees with specialized facilities that deliver superior outcomes for complex procedures.
• Reference-Based Pricing: Set payment levels based on Medicare rates rather than arbitrary provider charges.
• Tiered Networks: Create incentives that guide employees toward providers offering the best combination of quality and value.
• Performance Guarantees: Establish accountability measures with health care systems to ensure quality standards are met.

Conner Insurance: Your Partner in Self Funded Benefits Success

With over 70 years of experience, Conner Insurance delivers innovative insurance solutions for employers seeking greater control and transparent financial education in their benefits programs. We understand the benefits of self funded insurance plans and help organizations realize these advantages through our proprietary staged approach to implementation. We recognize that organizations need time to adapt to these changes, which is why our advisors become an extension of your HR team, providing ongoing support and expertise to maximize the value of your self funded plan while controlling costs and enhancing employee benefits.

Ready to find out if self-funding aligns with your organization’s goals? Contact our team at (317) 808-7711 to schedule a consultation with one of our benefits advisors.

Frequently Asked Questions

Is self health insurance a good idea?

Self funded health insurance can be an excellent option for organizations looking to gain more control over their health care spend while potentially reducing costs. Companies that implement self funded plans often experience greater flexibility in plan design, improved cash flow, and the ability to retain savings from lower-than-expected claims activity.

What are the benefits of self funded insurance plans?

Self funded insurance plans offer numerous advantages including elimination of carrier profit margins, exemption from state premium taxes, and access to detailed claims data for better decision-making. Organizations also benefit from improved cash flow management, the ability to customize benefits to their specific workforce needs, and the potential to implement targeted wellness programs that address high-cost health conditions.

How many employees do you need to be self-insured?

Self-funding typically becomes viable for organizations with approximately 50 or more employees, though this number can vary based on workforce demographics and risk tolerance. The ideal employee population count depends on factors such as claims predictability, stop-loss insurance availability, and the organization’s financial resources to manage potential fluctuations in health care costs.

Why would a company choose to be self-insured?

Companies choose self-insurance to gain control over their health care spend while creating benefit plans tailored specifically to their workforce’s needs. This approach allows organizations to eliminate carrier profit margins, access valuable claims data for strategic decision-making, retain savings from lower-than-expected claims, and implement targeted wellness initiatives that can improve employee health while reducing long-term costs.