Employers discover the following advantages of self funding health insurance:
Elimination of premium tax.
Lower cost of operation - administrative costs of a professional TPA are significantly lower.
Carrier profit margin and risk charges eliminated.
More effective claims processing - TPA's offer controlled and accurate claims processing for each employer.
Effective cost and utilization controls - TPA's can offer resources unavailable through a traditional carrier, such as a hospital bill audit program.
Cash flow benefit - the employer's cash flow is improved, due to lower premium costs and the retention of reserve funds.
Return on investment - Interest on reserves remains under the employer's control.
Control of plan design - flexibility in plan design and features, and the ability to redesign the plan to eliminate plan abuses.
Mandatory benefits avoided - State regulations mandating benefits are avoidable under fully self-funded plans.
Stop Loss flexibility - the employer may choose the amount of risk to retain and the amount covered by the stop loss coverage, affecting the actual cost of the plan.
Employers with good claims experience do not wind up subsidizing those with bad experience.
