Insights
Considerations when deciding to self-fund
Although self-funding a group health plan has the potential to significantly reduce a company’s health care costs, plan fiduciaries should carefully consider the company’s financial fitness before making the decision to self-fund.
When making a funding decision, employers should look at:
- Premiums and reserves. Employers must calculate projected costs to ensure adequate budgeting and calculation of employee and employer contributions.
- Risk tolerance. Employers should evaluate whether they’re prepared for the variability in costs associated with self-funding. Regardless of whether claims are funded through general assets or through a trust, adequate reserves must be available to pay claims – including unexpectedly high claims – as they occur.
- Insurance (e.g., the cost of stop-loss insurance) and plan administration costs.
