How does a self-funded health plan work?
Under a self-funded arrangement a plan sponsor assumes more of the financial risk for claims instead of paying a monthly premium to a carrier for a fully insured plan. In exchange for the assumption of risk, the employer/plan sponsor can realize great benefit. A properly structured self-funded health plan provides benefits and contains costs to the exact specifications of the employer. Under a self-funded health plan, the Plan Document defines the plan benefits just as the insurance policy controls the plan benefits with conventional insurance. A clearly worded, professionally drafted Plan Document is a key ingredient in establishing an effective self-funded health plan. Self-funded programs allow for the retention of underwriting profit and investment income by the employer while operating at a lower expense level than standard insurance plans. If a plan is well designed and managed, a self-funded/self-insured employer’s bottom line will be positively impacted, allowing dollars that w
