The Self-Funded Plan involves an arrangement whereby the employer assumes all the responsibilities and liabilities that an insurance company would normally assume. Basically, the employer is responsible for payment of all claims. However, problems arise when substantial claims are incurred by the employees. Therefore, most self-funded plans will be less economically feasible for small groups and will work very effectively for large groups due to the reduced risk.

There are various partially self-funded plans that are more feasible for small groups. This type of plan would be underwritten by an insurance company. The employer would be responsible for the co-insurance portion of the major medical plan, while the employee is responsible for the appropriate deductible. Traditionally, the co-insurance portion of a major medical plan is 80% of the $5,000 of medical costs that exceed the deductible. The insurance company is then responsible for all amounts exceeding the deductible and co-insurance.

The total annual aggregate out-of-pocket expenses for the employer work out to be what the average annual cost of a full-blown major medical plan would be for the same group. Therefore, if a company has a fairly good health history, it may save some money with a partially self-funded plan.

Two or more of the above health insurance plans can be used simultaneously with tax saving strategies.

Additional Information on Group Health Insurance

Comprehensive Major Medical Plan
Health Maintenance Organizations (HMOs)
Preferred Provider Organizations (PPO's)
Self Funded Plan
Cafeteria Plan
Conclusion

Click To Return to Health Insurance Main