Moving right, you take on more claims risk. In exchange you see more of your data and keep more of what you don't spend.
A self-funded health plan is one where the employer pays employee medical claims directly, typically with a third-party administrator, a provider network, stop-loss insurance and a pharmacy benefit manager.
How it works
You set aside money to pay health claims and partner with an administrator, often a carrier, to process and pay them on your behalf. Your employees still use the carrier's provider network. You pay the claims, and stop-loss insurance protects you from very large ones.
Because you're paying actual claims rather than a premium, you see where the money goes and you keep what you don't spend.
The moving parts
A self-funded plan is put together from separate pieces. We help you choose each one and manage them once they're running.
Third-party administrator (TPA)
Provider network
Stop-loss insurance
Claims funding account
Pharmacy benefit manager (PBM)
When it tends to make sense
PAKG generally starts evaluating self-funding for employers with 50 or more enrolled employees. Headcount isn't the whole answer. You need cash flow that can absorb a heavier claims month, and leadership that's comfortable with costs moving from year to year.
The employers who do best with it are the ones who want to manage health costs actively, through plan design, pharmacy and how employees use care.
Our stop-loss partner
PAKG works with Stealth Partner Group on self-funded solutions. Their team brings over 150 years of collective experience in the stop-loss and ancillary insurance market, which matters when contract terms are what protect you in a bad year.
What we keep an eye on
Stop-loss contracts are where self-funded plans get into trouble. We look closely at specific and aggregate limits, how claims incurred late in the year are handled, and whether a large claimant can be singled out with a higher deductible at renewal.
We also review pharmacy pricing, since drug spend is often the fastest-growing line, and audit billing so you're only paying for people who are actually enrolled.
What changes from one approach to the next
Factor
Fully insured
Level funded
Captive
Self-funded
Who pays claims
The carrier
A claims fund inside your monthly payment
You, up to a set level, then the shared pool
You, up to your stop-loss limits
Monthly cost
Fixed premium
Fixed monthly amount
Fixed fees plus claims that vary
Fixed fees plus claims that vary
Claims reporting
Very little
Monthly reports
Detailed
The most detail
After a low-claims year
The carrier keeps the difference
A surplus may come back to you
You keep unused funds, and the pool may return some
You keep what you didn't spend
Plan design flexibility
Carrier plan menus
Some flexibility
Considerable
The most
General comparison. Actual terms depend on the carrier, the program and your group.
“PAKG was able to take our age-based small group plan to a level-funded plan that resulted in a massive cost savings to both our company and every single enrolled employee.”
Jessica G., Director of Operations
Common questions
What is the difference between fully insured and level funded?
With a fully insured plan, the carrier takes on all claims risk for a fixed premium. A level-funded plan also has a fixed monthly cost, but it is built on your group's actual claims, gives you more reporting, and may return a surplus if claims come in lower than expected.
How many employees do you need to self-fund?
PAKG generally starts evaluating self-funding for employers with 50 or more enrolled employees. Group health, cash flow and risk tolerance matter as much as headcount.
What is stop-loss insurance?
Stop-loss insurance reimburses a self-funded employer when claims for one person, or for the whole plan, go past a set limit during the plan year.
