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Is a Self-Funded or Fully Insured Health Plan Better for Your Business?

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As the cost of offering company-sponsored health coverage continues to climb, many companies are looking for innovative ways to control the cost of offering competitive health benefits. Fully insured and self-funded plans are the most common types of employer-sponsored health coverage, and each has many options.

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Consider the following factors when determining the best health coverage model for your company:

  • Risk: With a fully insured plan all risk is assumed by the issuer. With a self-funded plan, risk is assumed by the employer, however risk is less of a factor with the purchase of stop-loss insurance. A stop-loss policy can protect your company from budget-breaking health expenses.
  • Budget: Fully insured plans offer the employer more financial predictability with fixed monthly premiums1 during the contract period. Self-funded plans allow the employer more control over the monthly costs because employers determine how much is placed into their claims fund.
  • Plan Design: With a fully insured plan, the issuer creates a set portfolio of plan designs. With a self-funded plan, employers have the flexibility to customize features that will allow them to better respond to their employees.

The differences between self-funded and fully insured plans

Choosing between a self-funded and fully insured health plan may be easier when you understand the differences.

  Fully insured plan Self-funded plan
Employer cost With a fully insured plan, employers pay a fixed premium each month based on the number of employees and their dependents. The issuer assumes the risk and the administrative burden on behalf of the employer. The monthly cost can be more than a self-funded plan but offers more financial predictability. The cost of a self-funded plan is typically lower. The employer keeps the profit in years when the claims fund exceeds claims expenses.
Plan funding The employer pays a fixed premium each month. The employer establishes and funds a claims account.
Risk and profit The insurer takes the risk. Employers are protected from the impact of cost variances for medical and pharmacy services. The employer takes the risk. Typically, employers purchase stop-loss insurance, which kicks in when claims exceed a certain level. This protects the company from the risk of large, unexpected claims.
Plan administration The insurer takes responsibility for most of the plan management - including, claim processing and payment, and providing customer service. The company is the plan administrator, managing all aspects of claims payment and customer service. However, some self-funded programs, including the program offered by Allstate Benefits, include administrative services.
How claims are paid The insurer is responsible for all claim payments if the group remains in good standing on all monthly premiums. Employers determine how much to save in their claims account. They can save the same amount each month to cover anticipated claims (called level funding) or simply pay claims as they are incurred (traditional funding).
Transparency Since the risk is assumed by the issuer, claims data is not shared with the employer. It may be more difficult to see how making changes in plan selections can save you money. When employers pay their own claims, they have access to data that can help them better plan for future expenses and implement cost-saving changes to their plan.
Insurance premiums infographic

Fully insured health plans from Allstate Benefits

Allstate Benefits offers Secure Choice4 for small businesses (those with 2 to 50 employees) that prefer the predictability and familiarity of a fully insured plan. Secure Choice is an Affordable Care Act-compliant5 PPO plan that pays benefits for both in-network and out-of-network health care providers.

With Secure Choice you get:

  • Convenience. It's easy to select a plan that best meets your company's needs and budget.
  • Less risk. You pay your premium, and we take care of the rest. All claims risk is assumed by Allstate Benefits.
  • Stability. We are a knowledgeable, experienced, and trustworthy carrier with more than a decade of experience in the small to mid-sized business market.
  • Guaranteed renewal. As long as you pay your premium, we will continue to renew your plan for as long as you like.

Self-funding is becoming a popular option

According to the KFF 2022 Employer Health Benefits Survey, 65% of all employees who are covered by company-sponsored health insurance are in a self-funded plan. Self-funding is a common choice among large companies because they can spread the risk of costly claims over a larger number of people. However, since 1999, the number of small and mid-sized businesses that are switching to self-funding is also trending upward. This may be due to companies like Allstate Benefits offering seamless, cost-effective solutions that make self-funding easy and less risky for even small businesses. Allstate Benefits offers a wide variety of self-funded and fully insured options, as well as top-level support to help you find the best fit for your company.

The Self-Funded Program from Allstate Benefits

With the Self-Funded Program for small and mid-sized businesses, you only pay for claims that are actually incurred. In years when claims are lower than expected, you may receive a refund.2 This can add up to big saving – about 60% of our groups receive a refund.3

Our program offers the same support and protections as fully insured plans, allowing you to focus on running your business instead of managing your insurance plan. All services are seamlessly combined into one solution:

  • Stop-loss insurance – When your group has higher-than-expected claims, stop-loss insurance kicks in. This protects your finances, so you know the maximum you will spend on claims each year.
  • Pharmacy benefits management.
  • Administrative support – All day-to-day administration, including customer service and claims processing, is handled for you by a third-party administrator.
  • Industry-leading cost-control programs that help lower your claims expenses.
  • The potential to receive a refund.

The Allstate Benefits Self-Funded Program offers mid-sized employers (those with 50-500 employees) even more choices:

  • Transparency: Some plans allow you to access claims data that can be used to identify opportunities for cost savings. In some cases, employers can track provider and prescription utilization. Employers may also have access to information about plan utilization and cost drivers to better understand what to expect for the next plan year.
  • Flexibility: If you have 51 or more group members, you may have a choice in how you pay your claims. With level funding, you make the same predictable payment every month, which gives you budgeting stability. With traditional funding, you pay claims as they are incurred, which keeps money in your pocket until it's needed.

Contact a sales representative to learn more about how Allstate Benefits can help your employees stay as healthy as possible.

1Premium is subject to change if number of insured employees changes.
2Refund applies to level-funded plans only. Refund is subject to any applicable Terminal Liability Coverage fee.
3Based on the percentage of groups that received a refund for plan years 2017 through 2019.
4Secure Choice is available in Florida, Indiana and Texas.
5See https://www.healthcare.gov/coverage/preventive-care-benefits for details.

The Self-Funded Program through Allstate Benefits provides tools for employers owning small to mid-sized businesses to establish a self-funded health benefit plan for their employees. The benefit plan is established by the employer and is not an insurance product. Allstate Benefits is a marketing name for: Integon National Insurance Company in CT, NY and VT; Integon Indemnity Corporation in FL; and National Health Insurance Company in CO, WA and all other states where offered. For employers in the Allstate Benefits Self-Funded Program, stop loss insurance is underwritten by these insurance companies in the noted states.

Allstate Benefits is a marketing name for: Integon National Insurance Company in TX and IN; and National Health Insurance Company in MO and FL. Group health insurance plans offered by Allstate Benefits are offered by Integon National Insurance Company in TX and IN; and National Health Insurance Company in MO and FL.

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