Myths of Self-Funding: Some Groups Are Too Small to Self-Fund
In the third and final installment of our Myths of Self-Funding Series, we’re tackling the common misconception that small organizations don’t have the same options as larger ones.
While it may be true that, traditionally, self-funding a medical plan was reserved for larger groups, this is no longer the case.
These days, virtually no employer is too small to self-fund. The determination to self-fund is dependent upon a few factors.
· The state where the employer resides.
· The economic condition of the employer and their financial risk tolerance.
· The underlying health of the group and past claims experience.
· The desire for flexibility in designing a benefit plan to meet the needs of their group as well as significantly lower administrative costs
These all help to determine whether an employer should self-fund or not.
The notion that employer size should be a threshold issue in the decision to self-fund is misplaced. For example, smaller firms that have more robust cash flows might be better suited for self-funding than larger firms with restricted cash flows.
Modern underwriting and stop-loss features make self-funding a plan accessible to even a two-person group! A group, regardless of size, should evaluate their unique situations and select an appropriate method to finance the risk of a health benefit plan.
An agency like New Edge Solutions can help to make this decision. Our access to preferred underwriting and disease management programs as well as our experience in guiding groups into a self-funded environment can help any group make the right choice for themselves.
So, if you’ve been thinking about how to control the costs of your health plan, don’t let the size of your group be the reason that you avoid exploring a self-funded health plan. Group size really doesn’t matter.