Self Insured Health Insurance plans provide an alternative for employers who desire greater regulation over their insurance compared to a traditional insurance plan. Traditional plans are managed by an insurance company. The insurance company assumes all risks, control plan administration and establishes reserve capital levels. Additionally, they handle the health care coverage of all employees and dependents.
With a Self Insured Health Insurance plan, the employer essentially takes on the role of the insurance company. The employer takes control of the plan administration and accordingly is responsible for the health plan liability and risk, as well as funding.
The benefits of a Self Insured Health Insurance plan include reduced operating costs. This cost reduction can be partly attributed to the lack or reduction of premium taxes. The company’s control over the Self Insured Health Insurance plan allows the employer to design the program to most effectively address the needs of the company and track exactly how funds are used.
In a Self Insured Health Insurance plan, the company need only pay for claims as they are incurred. The fund from which claims are paid is determined by the average cost of the company’s claims. To address the eventuality of an unexpectedly large claim, the Self Insured company may purchase excess insurance, known as Stop-Loss insurance, from an insurance company. The advantage of Stop-Loss insurance is the protection from unexpected catastrophes at a lower premium relative to a traditional fully inured plan.