Why self-fund?
There are many reasons why an employer would self-fund.

• The employer gains control over the benefit plan design and can customize it.
• The employer is not subject to conflicting state health insurance regulations and benefit mandates, as these plans are regulated under federal law (ERISA, HIPAA).
• The employer is not subject to state health insurance premium taxes.
• The employer is not funding the insurance company's profit margin.
• The employer maintains control over the health plan reserves, enabling maximization of interest income - income the insurance carrier would otherwise earn.
• Basically, self-funding provides greater control over the plan, and possibly some financial incentives.

How does it work?
Typically, an employer uses a Third Party Administrator (TPA) to assist in putting all the pieces together to self-fund. These pieces for administration of the plan include; pharmacy network, provider networks, case management, stop loss insurance, out of network re-pricing, nurse helpline, etc. The TPA typically coordinates with all the vendors and can suggest vendors to the employer that best meet their needs.

Once the pieces are in place, the TPA receives and adjudicates the claims, provides all the customer service, and coordinates the vendors on an on-going basis. The employer funds the claims. The TPA will track any large claims for filing with the stop loss vendor.