The Employer decides on a plan design that they wish to offer their Employees, and contracts with an Insurance Company to manage all of the claims and also to cover any claims that exceed a certain amount.
Employers generally look at how much they expect to pay for their Employee’s claims for the year in order to determine if this type of plan makes financial sense.
Self-Insured Plans are extremely flexible as you can specifically determine each and every benefit offered. Do you want a $212 Deductible? Why not, it’s your plan. Plan Design becomes important when you notice trends that might show that the plan is being abused, and you can modify the design specifically to deal with that abuse.
The biggest benefit, of course, is if your Employees are healthy, you can save all of the money that would have been spent on claims. Instead of the Insurance Company realizing a big profit off from your Company’s wellness, you save that money yourself. For this reason, most Self-Insured Plans are paired with an aggressive Wellness Program.
It’s often considered a bit of a gamble. The stakes are high, but not limitless. The Insurance Company will cover all of the catastrophic claims. If you are willing to risk a potential hit of 30%, in order to get a potential savings of 30%, then this type of plan might be for you.