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Employers may often discover the following advantages when operating a self funded program:

• ELIMINATION OF PREMIUM TAX - In many states there is no premium tax for the self funded claim fund. This represents an immediate savings, equal to the amount of the premium tax, which can be substantial.
• LOWER COST OF OPERATION - Frequently, administrative costs for a self funded program through a professional TPA are significantly lower than those charged by their previous insurer.
• CARRIER PROFIT MARGIN AND RISK CHARGE ELIMINATED - The profit margin enjoyed by the insurer or carrier is eliminated, for the bulk of the plan.
• EFFECTIVE CLAIMS PROCESSING - The TPA's success can be measured in providing accurate, controlled claim processing for each employer. This results in lower costs of operation which means less cost to you.
• COST AND UTILIZATION CONTROLS - The TPA will often be able to offer cost and utilization resources that may or may not be available through your insurer or carrier, such as an outpatient surgical program, a hospital bill audit program, and others.
• CASH FLOW BENEFIT - The employer's cash flow is improved when money formerly held by the insurance carrier, such as unreported claims and pending claims, is freed for use by the employer.
• RETURN ON INVESTMENT FOR RESERVES - Interest on reserves established by the employer remains under the employer's control.
• CONTROL OF PLAN DESIGN - The self funded employer has flexibility in the original plan design. The employer may also redesign the plan to eliminate plan abuses if they are encountered.
• MANDATORY BENEFITS AVOIDED - State regulations mandating costly or unwieldy benefits in fully-insured plans may be avoidable under fully self-funded plans, since these single employer plans are dictated by federal law under ERISA.
• RISK MANAGEMENT EFFECTIVENESS THROUGH STOP LOSS FLEXIBILITY - The employer may choose the amount of risk to retain and the amount to be covered by Stop Loss coverage. An insurer or carrier working with a fully insured plan has fixed, often mandated pooling levels allowing little flexibility.

The biggest advantage: employers with good claims experience do not wind up subsidizing those with bad experience. [back] [next]