Educating, Equipping and Empowering Small and Mid-Size Companies to Save

As insurance premiums skyrocket, more small and mid-sized companies are increasingly looking to contain spiraling employee health bills by adopting a self-funded insured model.

A self-funded, or self-insured plan, is one in which the employer assumes the financial risk for providing healthcare benefits to its employees. In practical terms, self-insured employers pay for claims out-of-pocket as they are presented instead of paying a pre-determined premium to an insurance carrier for a fully insured plan.

Self-funding is one of the most effective ways employers can control the rising costs of healthcare coverage. In understanding self-funding as a concept and how it differs from fully insured products, below are a few advantages and disadvantages of self-funding.

Potential advantages of self-funding:

Potential disadvantages of self-funding:

Self-funded plans are governed by the Employer Retirement Income Security Act (ERISA) and are appealing to employers because of the greater level of flexibility that comes with being able to tailor the plan to their needs with fewer state-mandated features. While firms take on additional financial risk, they are able to limit their total risk through the purchase of a stop-loss policy and benefit from the increased cost savings typical of the self-funded model.

Many employers, particularly those with more than 300 employees, will find the advantages of self-funding outweigh the disadvantages. Each group and situation is unique—a comprehensive evaluation including a financial comparison will provide the employer with the information to determine if self-funding is appropriate.

The Role of the PPO Network in a Self-Funding Arrangement

Most employers "lease" a PPO Network - such as the Arizona Foundation - for their employees, depending on benefit structure. This often saves out-of-pocket expense for the employee and reduces risk to the employer by allowing them to take advantage of established PPO contracts with physicians and hospitals.

Features of a good PPO network include:

The Arizona Foundation's Network offers the flexibility to choose physicians from within or outside of the organization's network. If you use the providers and hospitals listed in the Foundation Provider Directory, you receive a richer benefit.

Arizona Foundation's PPO and POS Network Plans are an excellent coverage choice because they offer a wide selection of hospitals and doctors. Competing on the size of the medical network has always been important and will continue to be. We take it a step further by identifying high quality providers; knowing who the better providers are and having the knowledge and tools to get employees there when they need care leads to better health outcomes and lower costs over the long run.

Many small and medium size companies are switching to a self-funded arrangement because it saves money, allows them to create customized plans, and it just makes sense! For more information on how the Arizona Foundation can help you save money on your employee benefits, and to see if self funding is right for you, call us today at 800-624-4277 or e-mail.