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“Wait, what's a self-funded plan again? And why does it makesense for my clients?”

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These are questions I hear from brokers all the time. And I getit. Self-funding can be complex. But it's time to get smarter aboutself-funded health benefit plan designs as this type of productcould be a game-changer for your smaller clients.

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Let's start with the basics. What is a self-fundedplan? Self-funding is an arrangement where an employer sponsors aself-funded health benefit plan and is financially responsible foremployee covered claims up to a certain dollar amount. Coveredclaims in excess of this dollar amount are reimbursed to theemployer through stop-loss insurance.

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Larger organizations have used self-funding for years as a wayto save costs, but more recently we're also seeing smaller businesses offering self-funded healthbenefit plans to their employees.

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The numbers back it up. Between 2013 and 2016, the percentage ofsmall employers offering at least one self-funded health benefitplan increased from 13.3 percent to 17.4 percent—a 31 percentincrease.

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Why are more small businesses offering self-funded healthbenefit plans? I see three big reasons:

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1: Self-funding can be a great tool to attract andretain employees.

When it comes to health care, employees want choice andaffordable options. Self-funded health benefit plans can give youremployees both. From comprehensive medical to preventive-onlycoverage, your employees will have a variety of options. And,they'll have those choices at affordable prices. That can be a keytool to attracting and retaining employees in an increasingly tightlabor market.

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2: Self-funding provides flexibility.

Employers can customize their self-funded health benefit planswith different deductibles and coinsurance choices to fit theirneeds, whether it's a preferred provider organization (PPO) plandesign, consumer-directed health plan (CDHP) design, ora reference-based pricing or preventive-only plan design.

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3: Self-funding can help lower employercosts.

There are a variety of ways self-funded health benefit plans canhelp employers lower costs. First, employers can receive refunds ifthere is a surplus of claim dollars in their prefund account at theend of the plan year. Second, claim dollars are not subject tostate health insurance premium taxes, which can help lower costs(premium taxes average around 2 percent). And finally, self-fundedhealth benefit plans give employers access to aggregate healthclaims data and demographic information. This data — availableexclusively under a self-funded arrangement versus traditionalhealth insurance — allows employers to better manage costs andencourage cost-savings measures their employees can practice, suchas switching to generic medications, using in-network providers,and selecting a different level of care.

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In the end, better understanding the ins and outs ofself-funding will mean more choices for your small employerclients—and more success for you.

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With some research and education on how self-funding works andthe carriers/TPAs that offer administrative services, self-fundedhealth benefit plan designs and stop-loss insurance, you can become well-versedin what's available in the marketplace and learn if and when aself-funded health benefit plan design could be a potential fit foryour smaller clients. Having a solid knowledge is a good start tohave the advantage over another broker who didn't evaluateself-funding as a viable option.

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Darick Bradford is a sales consultant in Charlotte, N.C. forStarmark (Star Marketing & Administration, Inc.) and TrustmarkLife Insurance Company. With more than 26 years of combined grouphealth benefit plan experience, including both the fully insured,Medicare and self-funded sectors, Darick currently works withbrokers with their sales of self-funded plan designs in thesoutheastern United States. Darick is a member of the NationalAssociation of Health Underwriters (NAHU) and local chaptersincluding, GAHU, AAHU, SAAHU, MAHU, SCAHU, NCAHU andFLAHU.

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