What is self-funded insurance?
Self-funded insurance is a type of health insurance plan that offers employers flexibility and potential savings from traditional insurance plans. In a self-funded insurance plan, employers take on most of the risk of providing health benefits to their employees—paying their claims directly rather than through an insurer. Self-funding gives employers greater autonomy in setting plan parameters and designs, and provides a more tailored coverage to their employees than traditional insurance plans.
How does self-funding differ from traditional insurance?
The difference between self-funded insurance and traditional insurance plans lies primarily in the degree of control the employer wields: in self-funded plans, employers can decide which benefits to offer their employees and how much those benefits will cost. Additionally, the employer can make changes to the plan when needed, such as implementing new coverage or raising or lowering premiums as necessary. In traditional insurance plans, by contrast, employers are often limited in their ability to make changes because any change requires approval from the insurer.
Another key difference between traditional and self-funded insurance plans is who is responsible for the costs incurred through claims. In traditional insurance plans, the insurer pays for claims; in self-funded plans, the employer is the one who pays out for the claims. This shifts much of the financial risk away from the insurer and onto the employer, though it also allows employers to potentially save money by avoiding some of the fees and administrative costs associated with insurance companies.
Implications for medical billing and claims
The impact of self-funded insurance on medical billing and claims can vary depending on the parameters of the plan. Since self-funded plans can be tailored to a particular employer’s needs, they can potentially offer different reimbursement rates for procedures and services than traditional insurance plans. Additionally, self-funded plans may impose different preauthorization and other requirements that providers must comply with in order to be reimbursed for services. As a result, it is important for providers and billing staff to become familiar with any self-funded plans in their area so they can ensure they are properly billing for services and complying with all the necessary requirements.
Overall, self-funded insurance plans offer employers flexibility and the potential for cost savings, while shifting some of the risk of providing benefits to employees to the employer. Additionally, they can impact medical billing and claims practices, as providers must be aware of any different reimbursement rates and requirements imposed by these plans.