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Is Self-Funding Right for Me?

The questions and answers below will help you determine whether or not a partially self-funded health plan is right for your company.

Q. What are the advantages of self-funding?

A. You are practically guaranteed to save money in the first 12 months. Your claim payments will start the second or third month, so you save 12 month's premiums while only paying 10 or 11 months claims. You, not the insurer, keep the money for the "incurred but unreported claims." In addition, you do not pay premium taxes on your total premium. You will only pay taxes on the stop loss premium.

Q. Is self-funding for me?

A. Your employee demographics will tell you. You need to properly understand any risk and the rewards involved.

Q. What makes self-funding worth consideration?

A. You've heard of the 80/20 principle - you get 80% of your results from 20% of your efforts. It applies in health insurance, just as in everything else. The healthy 80% overpay and effectively subsidize the sickest 20%. If you're willing to carry some of the risk for your group, self-funding can help you profit from that.

You're not going to pay all of your company's health claims. Rather, you partner with a stop loss insurer. You pay the small, frequent claims, and the carrier pays the larger, infrequent and unaffordable claims. Click to read "What is Stop Loss Insurance?"

Q. What pitfalls should I watch for?

A. Your cash flow can fluctuate significantly, so be sure to maintain adequate reserves.

For more information on self-insured plans, or to obtain a quote, contact a Diversified Group Sales Representative at 888-322-2524 today.