Why Self Funding
WHY A SHARED-FUNDING OR PARTIALLY SELF-INSURED PROGRAM?
CONTROL OF PROGRAM DESIGN
Under a partially self-insured plan, a client can design their program as they desire within certain limitations. The client may be as involved as they feel appropriate in the management of their plan. With a partially self-funded plan, an employer can avoid State mandated in designing their Plan.
Using AIR as administrator, the employer is not limited to a short list of standard "off-the-shelf" plan designs common to most larger insurance companies and national TPA's. We are very flexible in the design of your plan, giving you more control over the benefits (and the cost of benefits) that best suit your particular organization.
LOWER COSTS AND IMPROVED CASH FLOW
Administrative costs of a third party administrator are lower than similar costs from an insurance company. The insurance company's profit margin can be avoided in a partially self-funded plan.
From a cash flow perspective, the employer only pays the fixed plan expenses in advance each month. Expenses for claims are only paid when claims have been received and processed by the TPA. Under a fully insured plan, the employer pays insurance premiums in advance to, in effect, pre-fund the plan's claims expenses.
Unlike a traditional insurance plan, should the program generate an underwriting profit, this profit remains with the client and not the insurance carrier. In the event of adverse claims experience, the plan is protected by proper placement of stop loss coverage.
Under a traditional fully insured plan, the employer has limited options at renewal. If rates increase, the employer has the option of choosing a lower cost plan from a limited selection of plans offered by the incumbent carrier, or by seeking coverage through another insurance carrier.
Changing carriers involves new communication materials, new provider networks, new identification cards, and administrative disruption for the employer.
Under a partially self-funded plan, there are a number of remedies for increased costs:
- Targeted changes in benefits, based on an informed analysis of claims experience
- Stop Loss coverage is marketed every year to a variety of markets. If favorable terms are not offered by the incumbent carrier, the underlying coverage can be moved with no impact on employees