How To Know If Self Funding Is Right For Your Business

If you’ve considered self-funding an option for your health insurance plan, you’ve probably heard the following:

It’s too risky.

You’re not big enough.

I’ve seen companies go bankrupt because they were self-funded.

It’s easy to focus on the fears, especially when there are so many unknowns. However, a deeper dive may uncover that it’s not so scary after all.

If self-funding your health insurance plan is something you’re looking into, let me help you gain clarity. Here are a few of the pros and cons you need to consider:

PROS

• Self-funding will give you more flexibility in the design of your health insurance plan. You get to choose which benefits best fit the needs of your employees and your bottom line instead of picking a plan “off the shelf” from the insurance company.
• Self-funding creates transparency. You’ll get a clear look at where your money is going and how it’s being spent. The more transparency you get the more effective strategies you can create.
• You can be rewarded for your good risk. In a self-funded insurance plan, your costs are based on your performance, not the insurance company’s book of business. The lower your claims the more you save and you can actually reduce your costs at renewal time.

CONS

• With self-funding comes additional responsibility and reporting requirements. When you administer a self-funded plan you are the fiduciary so it’s imperative you keep a close eye on how your money is being spent. You must look out for the best interest of your employees.
• As mentioned above, your costs are based on your performance. When you experience a year with higher-than-usual claims activity, it will be reflected in your overall costs.
• You must work with an advisor experienced with self-funded health insurance plans. It’s important your plan is set up appropriately so you’re not exposed to unnecessary costs or uncovered liabilities.

Self-funding is the most effective way to control your health insurance costs, but you have to go into it with confidence. I hope the points shared above will give you the confidence to determine if it’s a good fit for you.

If you’re still unsure, let’s connect. In one strategy call, we can help you determine what is the right plan for you.

Schedule a free strategy call -?https://calendly.com/davidgoldfarb/15-minute-call

Clarity leads to confidence, confidence leads to cost control!