Guide to Self-funded Health Plans

Take a crash-course in self-insurance

The tax and human-resource implications can be off-putting at first, but you are essentially exchanging a sure loss -- premiums -- for a pool of cash your company controls that is used to pay your employees' medical care bills.

I recommend: The Self-Insurance Institute of America, which promotes self-funded plans for business, has this simple Web site, including a decent questions and answers page.

Would your business benefit from a self-funded plan?

It can be as simple as adding up claims over the past five years. Dig out the records and make a simple comparison.

I recommend: Eagle Claims Management, a third-party admin, offers this handy calculator. You can make a comparison on just the last year, or go back over five for safety's sake.

What if one of my employees has a huge claim?

The risk of self-funded insurance, of course, is the runaway health problem that costs millions and never seems to end. Cover the risk with stop-loss insurance, also known as excess insurance and reinsurance. Either way, after $35,000, or $350,000 or more, your financial pain stops.

I recommend: See a good explanation of stop-loss policies at 360 Degrees of Financial Literacy.

Find a vendor to help you get started

Most major insurancer carriers will help you set up a plan in order to sell you stop-loss policy.

I recommend: Some top health insurance vendors include Assurant Health, Aetna, Blue Cross and Blue Shield, United Health, Cigna, Humana, Principal and Kaiser Permanente.

Find a plan administrator

Going self-funded means more human-resources work, although an administrator can take on the work for a fee.

I recommend: The Self-Insurance Institute has a great list of active administrators with detailed contact data. One of the largest is Meritain. Google, too, has an exhaustive list of so-called TPAs, or third-party administrators.