Self-insurance allows employers:
- To better customize benefit plans. Self-funded plans allow employers to specifically offer benefits that fit the needs of their employees and meet employer financial and human resource goals.
- To benefit from the unbundling of services. Major services such as reinsurance and Third Party Administration (TPA) can be obtained from separate vendors at better prices and better service.
- To benefit immediately from favorable claims experience. An employer who self-insures only pays benefits applicable to their group's claims history. Claims are not pooled with the claims experience of other groups their size. Should an employer experience a favorable claims experience to premium paid under a fully insured plan, it is very unlikely the employer would have their premium reduced.
- Greater financial control over how the plan is funded. Funding is more flexible in self-insurance than in a fully insured scenario, possibly improving an employer's cash flow.
- More flexibility in the manner in which claims are paid. Appeals and exceptions can be handled with greater flexibility and ultimately the employer can make the exception if desired.
- More control in the approach to some federal and most state legislative benefit mandates. Employers can decide whether or not to offer these benefits in many cases.
- More flexibility in the designing and contracting of managed care networks.
- To hold their own claim reserves. The employer can earn interest on plan reserves and assets.
- To not pay the full amount of premium taxes. State taxes on a self-funded plan are a fraction of those in a fully insured plan.