For many small businesses, the rising cost of traditional health insurance has become a serious challenge. Self-funding offers a smarter alternative. With a self-funded health plan, employers pay for claims directly or through a Third-Party Administrator (TPA) instead of paying a fixed premium to an insurance carrier. In other words, the employer retains control of their money when claims are paid.
Cost Control: Employers gain transparency into where healthcare dollars are going and can take steps to manage spending more effectively.
Flexibility: Plans can be tailored to fit the needs of the employees, rather than having one-size-fits-all coverage.
Savings Potential: By avoiding the high margins and overhead of traditional insurers, small businesses can often save up to 20%-40% compared to fully insured plans.
Protection from Risk: Adding stop-loss insurance means that even in the event of a high-cost claim the employer’s financial risk is capped.
Self-funding is no longer just for large corporations. Today, with innovative plan designs and strong support from third-party administrators, small businesses can take advantage of the same strategies to lower costs, improve benefits, and remain competitive in attracting talent.
In fact, 63% of Americans have already made the shift to a self-funded health plan.
Self-funding, means never again having to blindly pay monthly premiums — instead, you control your health plan design and costs.
This results in more transparency and lower costs for your business.
It’s a ‘cut-out-the-middle man’ approach that is helping companies regain control of runaway healthcare spending, while improving healthcare outcomes for their employees.
Below are 4 reasons to switch to self-funding.
- Reduced insurance costs
Insurance companies tack on what’s known as a risk charge for their policies that amounts to approximately 2-4% a year. Depending on the size of your workforce, this charge can range from thousands of dollars to potentially millions. A self-insured company never has to pay this cost. - Reduced state premium taxes
Self-insured programs, unlike insured policies, are not subject to state premium taxes. The premium tax savings is about 2-3% of the premium dollar value. Again, we’re talking about potentially saving many thousands of dollars annually, if not more. - Full control over healthcare spend
Self-funded plans are subject only to the Employee Retirement Income Security Act (ERISA), so they can choose the benefits that best fit the needs of their employee group; and that meet the federal government’s “essential health benefits” minimums. - Improved cash flow
Self-insured employers do not have to prepay for coverage (the premium paid to an insurer), and claims are paid only as they become due. In low-claim years, this can result in significant savings.
With premiums continuing to rise year after year, many businesses are exploring new solutions—like self-funding—and taking back control over benefit decisions and medical costs.
If you are ready to make the switch and would like a free consultation, call us at 866-549-4199 or email sales@ovation-health.com