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The Advantages of Self-Funding

Morgan Festa /

 

A self-funded group health plan is one in which the employer eliminates obligations to a health plan provider by assuming the financial risk for providing health care benefits directly to its employees. While experienced, successful business managers are experts at mitigating risks, many will gladly take on risk exposure if the probability is good for a high payout.

There are numerous well-documented advantages to self-funding for employers that manage risk well; including:

• Reduced insurance overhead costs. Carriers assess a risk charge for insured policies (approximately 2 percent annually), but self-insurance removes this charge.

• Reduced state premium taxes. Self-insured programs, unlike insured policies, are not subject to state premium taxes. The premium tax savings is about 2 to 3 percent of the premium dollar value.

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