Self-Funded Health Plans, Explained
The Steward Program from Peacock Insurance Agency
Where the money actually goes
Ask most business administrators what they pay for health insurance, and they can tell you the monthly number to the dollar. Ask them where that money went, and the room goes quiet.
That is not a knock on anyone. On a fully insured plan, you are not supposed to know. You hand the carrier a premium, the carrier takes the risk, and what happens between those two points is their business. If your staff has a healthy year and files almost nothing, the carrier keeps the difference. You find out at renewal, when the rate goes up anyway.
A business or ministry that scrutinizes every line of the facilities budget is often writing its second or third largest check with no visibility at all.
Self-funding changes that. It is not a product. It is a different arrangement of who holds the money and who carries the risk.
How a self-funded plan is built
People hear “self-funded” and picture the business writing checks for open-heart surgery. That is not it. A self-funded plan has five parts, and four of them look exactly like what you have now.
The claims fund. Instead of paying a premium, you fund an account each month based on what your group is expected to spend. Claims get paid out of it. Money that does not get spent stays yours.
The TPA. A third-party administrator processes claims, handles member services, and produces the reporting. Your staff still get an ID card and still call a number when something goes wrong. From their side, almost nothing changes.
The network. You still rent a major carrier network, so your people keep access to the same hospitals and physicians. Nobody has to leave their doctor because you changed how the plan is funded.
The pharmacy benefit manager. Drug spend gets managed separately. This is often where the largest savings hide, and it is nearly impossible to see under a fully insured contract.
Stop-loss insurance. This is the part that answers the open heart surgery question. Stop-loss is a policy that caps your exposure, and it works two ways. Specific stop-loss covers any one person who runs up a catastrophic claim. Aggregate stop-loss covers the whole group running hot at once. Above those thresholds, the insurance stop-loss pays. You are not betting the business on anyone’s diagnosis.
The part that compounds
Here is what a fully insured renewal can never do for you.
Under a self-funded arrangement, a healthy year benefits the business. Claims come in low, surplus comes back, and your funding rate at the next renewal reflects your group instead of a statewide pool. Get healthier, and the number moves again. Each good year builds on the one before it.
That is a real financial reason to care about staff health. Not a poster in the break room. An actual line item.
The part businesses keep skipping
We named this The Steward Program because stewardship runs in two directions here, and ministries usually only run it in one.
Most staff are famously bad at taking care of their own bodies. Scripture gets used to justify it, usually by citing the passage ranking spiritual discipline above bodily discipline. That verse is not wrong, but further in Scripture, Paul calls the body a temple of the Holy Spirit and asks us to present our bodies as a living sacrifice, holy and acceptable to God. A living sacrifice, not a worn-out one. Neglect is not the same thing as devotion.
Steward Well is the health side of the program. Screenings, real goals, and support that leadership actually backs rather than announces. It exists because on this kind of plan, a staff that gets healthier is a staff that costs less to insure, and the savings come back to the business that invested in them.
Faithful with the funds. Faithful with the body. Both, or the phrase does not mean much.
Is your group a fit?
Self-funding is not right for everyone, and we will tell you when it is not. The general shape of a good fit:
- Roughly 50 or more benefit-eligible W-2 employees
- Cash flow steady enough to handle small month-to-month claim variation
- Leadership willing to look at the actual claims data
- A renewal that has gone up more than once without a clear reason
Under about 50 lives, the math is thinner, and we would rather say so than sell you something. However, we have helped and can help businesses down to 25 employees enrolled.
What a review looks like
No cost, no obligation, and nothing gets quoted from a guess. We ask for your renewal date, a census, your current plan documents, and your claims history. We come back with a real comparison against what you have now.
If self-funding is not better for your business, that is a legitimate answer, and you will get it in writing.
Filed Under: Business Insurance, Health Insurance