Self-Funded Health Plans Basics and Benefits
Self-funding is a way employers can pay for the health coverage offered to employees that provides cost saving opportunities and increased control over the health plan. See if self-funding is right for your company.
Plans offered by Cigna Health and Life Insurance Company
What is self-funding?
With self-funding—sometimes referred to as “self-insurance”—employers can handle their funding in three ways. They may administer their health plan internally, hire a third-party administrator (TPA) to manage their plan and process claims, or purchase a self-funded solution through an insurance carrier, such as Cigna Healthcare℠.
Additionally, employers who self-fund their health plan pay for claims out of their own pocket. This means they benefit in real time when claims are lower than expected but assume all the risk when claims are higher than expected.
However, self-funded employers concerned about the risk of high-cost claims have the opportunity to purchase stop loss insurance. Stop loss insurance can help protect employers from the unexpected.
What are the benefits of self-funded health plans?
There are two primary reasons employers choose self-funding as their funding solution.
Cost Savings Opportunities
When claims are low, self-funded employers pay a lower amount. The total premium is also lower as it only includes administrative fees as well as individual and aggregate stop loss premium (if included).
Additionally, in most states, there is no premium tax applied to claims funded directly by an employer. This gives employers who have self-funded health plans lower taxes than a traditional insured policy.
Greater Control
Employers may find that self-funded plans give them more ability to customize plans to meet their business goals and employees’ needs. This is because most state benefit mandates do not apply, which allows employers to design coverage that drives affordability, does not have to vary across state lines, and can be modified to change with the variable demographics of those covered under the health plan.
Additionally, self-funded employers receive detailed reporting that can help them make the best decisions possible for their plan. This reporting shows exactly where your money is going in relation to your plan.
Fully Insured vs. Self-Funded Plans: What’s the difference?
Employer health plan funding tends to fall into two categories: self-funded and fully insured health plans. Learn more about the differences between these two types of funding.
| Self-Funded Plans | Fully Insured Plans | |
|---|---|---|
| Claim Management | Administered in-house, with a TPA, or with an integrated carrier. | Carrier assumes full claim liability. |
| Monthly Claim Payments | Payments have more variability. Low claims = lower payments; high claims = higher payments. | Payments are more predictable. Rates are guaranteed for plan year. |
| State-Mandated Benefits | No | Yes |
Are self-funded health plans right for my company?
Self-funded plans are not right for every employer, but they can provide many benefits for certain companies.
It’s a common misconception that self-funded plans are only right for large employers. In fact, there are many solutions that can be designed specifically for small companies to midsize companies as well.
What self-funded plans does Cigna Healthcare offer?
Cigna Healthcare has three self-funded solutions, designed to meet differing employer needs:
- Cigna Level Funding®
- Cigna Graded Funding℠
- Administrative Services Only (ASO)
Learn more about funding solutions from Cigna Healthcare.
To find out which plan is right for you, contact your broker or Cigna Healthcare representative to get more details.
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Product availability may vary by location and plan type and is subject to change. All group health insurance policies and health benefit plans contain exclusions and limitations. For costs and details of coverage, contact a Cigna Healthcare representative.
Cigna Healthcare products and services are provided exclusively by or through operating subsidiaries of The Cigna Group, including Cigna Health and Life Insurance Company (Bloomfield, CT), or its affiliates. In Utah, all products and services are provided by Cigna Health and Life Insurance Company (Bloomfield, CT). Policy forms: OK – HP-APP-1 et al., OR – HP-POL38 02-13, TN – HP-POL43/HC-CER1V1 et al. (CHLIC); GSA-COVER, et al. (CHC-TN).
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