Why do employers self-fund their health plans?
There are many advantages to self-funding, the primary advantage being cost savings: • An employer does not pay full state premium taxes, which usually range from 2 percent to 3 percent of the monthly insurance premium, if he’s self-funded. Every state taxes insurance companies on the premiums collected. The insurance company in turn passed these costs back to the employer. In a self-funded plan, premiums are collected only on the excess loss coverage – a fraction of the regular insured premium; therefore premium taxes are substantially reduced. • In a self-funded plan, you do not pay insurance company risk and retention charges. An insurance company charges several fees to insure and administer a health plan. Many of these, such as booklet printing costs or actuarial fees, must be paid no matter how the plan is funded or who administers it. However, some insurance company’s charges such as risk and retention charges are not applicable to self-funded plans. They simply do not exist in
