Fact vs. Fiction

Self-Funding Fact and Fiction

Myth #1 - Most self-funded plans are totally self-funded.

Except for the largest corporations, most employers who choose to self-fund their employee health plan purchase insurance to cover catastrophic individual claims and sometimes the aggregate claims for the entire group if they exceed expected levels.

Myth #2 - Only very large companies can afford self-funding.

Most of the tremendous growth that has taken place in self-funding recently has actually been among smaller companies, some with no more than 25 employees.  The economic advantages of self-funding do not change with the number of employees enrolled in the plan.  The key is purchasing the appropriate level of coverage for catastrophic claims, which is referred to as stop-loss or excess-loss insurance.  Many smaller companies have found self-funding to be very cost effective, flexible, and successful.  Regardless of the number of employees enrolled in a self-funded plan, strategies such as utilization management and wellness-related education can be incorporated to allow the self-funded concept to succeed.

Myth #3 – Only large insurance carriers or HMOs have big provider networks.

We work with a number of national and regional PPO networks and select the best one(s) to meet each of our clients’ needs.  We have also developed our own provider network in Michigan with over 65,700 participating providers.

Myth #4 - Self-funded coverage isn’t accepted by health care providers.

Self-funding is such a common form of health benefit coverage that health care providers see patients every day that are covered under self-funded plans.  Two-thirds of employees in the U.S. who are covered under an employer-sponsored health plan are covered by some form of self-funded health plan.

Myth #5 – Self-funding is too much work for the employer.

An employer is required to do little more day-to-day administrative work with an ASR-managed self-funded health plan than with an insured plan.  We handle the day-to-day claims processing and virtually all customer service inquiries.

Myth #6 - Self-funded plans are not subject to regulation.

Nothing could be further from the truth.  Self-funded plans are subject to the Employee Retirement Income Security Act (ERISA), which was designed by Congress to provide stringent consumer protections.  ERISA requires that each benefit transaction follow the coverage provisions outlined in the plan document.  Furthermore, HIPAA Privacy, Security, and Portability provisions also apply to self-funded plans.  At ASR Health Benefits, we make sure our business practices comply with these regulations, and we aid our clients with compliance.