A practical guide to self-funded group health plans

Compare the costs, risk, and rewards to see if this fits your business

If you’re an employer, you’re likely feeling the pressure of rising health insurance costs. You may be wondering if there’s a better way to manage health care expenses without compromising the quality of coverage your employees depend on.

Choosing the right health plan model is a critical step toward controlling costs and creating long-term value. For many businesses, including small- and mid-sized employers, that may include exploring self-funded health plans, which can be more flexible and cost-effective in the right situations.

With self-funding, employers take a more active role in financing health care, opening the door to potential savings and greater control. Instead of paying fixed premiums, you pay claims as they happen while still partnering with Blue Cross and Blue Shield of Kansas (BCBSKS) to handle benefits administration and provide stop-loss coverage for added protection.

Fully-insured vs. self-funded: A quick comparison

What is a fully-insured plan?

It’s the traditional model most employers know. You pay a set monthly premium to an insurance carrier, and they handle the rest—claims, administration and risk.

Advantages:

• Predictable monthly cost
• Minimal admin work
• Low financial risk
• Compliance protection

What is a self-funded plan?

Instead of pre-paying premiums, you pay for claims as they happen. You’ll still partner with Blue Cross and Blue Shield of Kansas (BCBSKS) to handle benefits and claims and to purchase stop-loss insurance to protect against big-ticket costs.

Advantages:

• Improved cash flow management
• Transparent access to claims data for informed decision-making
• More flexibility in finding a plan that works for your employees
• Potential for cost savings

What could you save?

Let’s say you have 75 employees and spend $900,000 annually on a fully-insured plan. In a self-funded model, your total cost might look more like this:

• Actual claims: $425,000
• Admin & stop-loss coverage: $375,000
• Total: $800,000
• Potential savings: $100,000 per year

This is a hypothetical example for illustrative purposes only. Actual costs may vary depending on factors such as claims experience, administrative fees and stop-loss coverage. Savings are not guaranteed. If your group has a year of unexpectedly high claims, your costs could exceed what you’d pay for a fully-insured plan.

What is stop-loss coverage?

Stop-loss protects self-funded employers from unexpectedly high healthcare costs by reimbursing claims that exceed predetermined limits. There are two main types: individual stop-loss, which covers high-cost claims for individuals, and aggregate stop-loss, which limits total claims liability across the group.

Stop-loss doesn’t eliminate risk entirely, but it helps make self-funding more predictable and manageable.

BCBSKS offers a range of stop-loss solutions, including individual and aggregate stop-loss coverage. These options are designed to help employers effectively manage and mitigate the financial risk associated with self-funded health plans, while still taking advantage of their potential savings and flexibility.

No lasers.

Some stop-loss carriers apply what's called a ‘laser,’ which sets a higher deductible for certain high-risk employees. This means the employer has to pay more out of pocket for that individual’s claims before stop-loss coverage kicks in. Lasers can expose the employer to greater financial risk for just a few individuals. Blue Cross and Blue Shield of Kansas does not use lasers in its stop-loss policies, so your risk protection is consistent across your entire employee population.

Is self-funding right for you?

It may be a great fit if your business:

• Sees relatively stable or low healthcare utilization
• Wants more control over plan design and costs
• Is looking for long-term savings, not just short-term fixes

At BCBSKS, we provide the tools, data and support to help self-funding work for you without the headaches. We help protect your business while giving you more control than a fully-insured plan.

Let’s Explore Your Options.

Wondering how much you could save or what plan setup is right for you? We’re here to walk you through the options. Contact your BCBSKS representative today to get a side-by-side comparison and see if self-funding is your next smart move.

Important considerations.

Self-funding isn’t the best fit for every employer. While it offers potential savings and flexibility, it also comes with added responsibility. We’ve outlined the key factors to evaluate in our article on key self-funding considerations.