How to Build a Self-Funded Health Plan

Some employers may have held off on self-funding a health plan because they felt they were too small to service and couldn’t do it on their own. However, transitioning from a traditional plan to a self-funded plan doesn’t have to be a solo process. While the employer is ultimately responsible for decisions made in the plan, there are several partners to help guide those decisions to the best outcomes for employees. 

Benefits advisor or consultant. Advisors are critical to employers as they make the switch to self-funding. They need someone who understands self-funding, and will be proactive about finding vendors whose interests are aligned with theirs. Advisors who are committed to helping their clients achieve better outcomes are invaluable to employers.  

Third-party administrators. Self-funded plans are regulated differently from fully insured plans, so it’s important to find an administrator that understands the Employee Retirement Income Security Act of 1974 (ERISA), the law that governs self-funded plans. A qualified administrator soothes clients who are worried about a self-funded plan being too much work. 

Stop-loss insurance and reinsurance. Stop-loss insurance sets a maximum liability that employers will have to spend on claims. There are two types of policies. With specific stop-loss, employers can select a maximum level that they will spend per claimant. After an employee hits their maximum, the insurance carrier will cover those claims or reimburse the plan. Aggregate stop-loss sets a maximum level for the entire plan. Springbuk notes that the aggregate level is based on the plan’s enrollment level and a percentage of anticipated claims. 

Self-funded doesn’t have to mean self-contained. Advisors help their clients assemble a team to guide them through the transition process.