Self-insured (also known as self-funded) health insurance in Texas is a type of health insurance where an employer bears the financial risk of administering health care benefits to its workers. The employer sets aside funds and handles the payment of their medical services, coverage needs, and claims. Some employers charge their employees a premium. Under self-insurance, the employer bears the risk of covering medical expenses. This is in contrast to traditional fully-insured plans where the employer pays a fixed premium for each enrollee to a health insurance company that bears the risk for health claims. So instead of paying premiums to an insurance company like in fully-insured health insurance, the employer handles the health claims of its employees. Some Texas self-insured plans pay out all claims, while others use stop-loss insurance to protect against large claims. Stop-loss insurance protects against catastrophic or unpredictable losses. It is usually purchased by employers who self-fund their employees’ benefit programs and do not want to take full responsibility for losses that arise from the plan.
An employer that elects to self-fund their employees’ health insurance, handles the administrative tasks that an insurance company normally performs. These include:
Most Texas employers do not have the skill and experience or qualified personnel to handle these tasks by themselves; instead, they hire a third-party administrator (TPA).
A TPA is an individual or entity that provides professional services in relation to managing employees’ health plans, by carrying out most of the tasks listed above. The employer provides the funds that the TPA uses to pay all covered health claims. Employers do this by creating a trust fund for paying claims or paying claims from its general assets. An insurance company can also be a TPA. Also, while a TPA administers the health plan, the plan sponsor – the employer – is ultimately responsible for the plan’s effective management and payment of all covered claims. The TPA is usually not a fiduciary. Consequently, when an employer hires a TPA, they should choose a high-quality TPA and properly monitor them.
Self-insured health insurance is also called self-funded health insurance. At first, only large companies offered self-insured coverage to their employees, but now, smaller Texas companies also provide self-insured plans. The idea is to provide coverage for the particular needs of each employee rather than pay for a “one-size-fits-all” plan with an insurance company. Since self-insured plans are less regulated, they are more flexible than standard fully-insured plans, allowing employers to tailor a healthcare plan to their employees’ specific needs. Furthermore, self-insured health plans save the business a lot of money on premiums. Self-insured plans are exempt from state regulation and are solely regulated by the federal government because they are not obtained from a state-licensed insurance company.
Note: A small company consists of one to 50 full-time employees, while a large company has 51 or more full-time employees.
In Texas, self-insured health insurance is a health plan strategy where an employer handles the health plans of their various employees directly rather than through a health insurance company. That is, instead of paying premiums to a health insurance company to cover those costs, an employer pays member health claims directly to health providers. Companies that opt for self-funded plans avoid the traditional health insurance paradigm and work with a third-party administrator (TPA) to set up, administer, and manage the plan. The services include enrollment, premium collection, customer service, and utilization review. Some companies administer the plan themselves.
Being under a self-insured plan means that instead of paying an insurance company to handle its employees’ health coverage, a company handles and pays its employees’ health coverage by using a TPA. So, instead of sending money to an insurance company, the money stays in their budget. The insurance coverage offered does not change. It is the means it is provided that changes.
Self-funded health plans are very common in Texas. In accordance with the regulatory laws, these plans must protect employees by limiting exclusions from coverage for pre-existing conditions and limiting premium differences for employees based on health factors.
Self-insured health insurance is one of the ways an employer provides comprehensive health coverage for their employees by directly managing the costs in Texas. The coverage also extends to the dependents of each employee.
Employers choose to self-insure their health employees’ plans to avoid state insurance taxes and other mandates and have more control over the administration and planning of health coverage, particularly regarding costs.
Over 61% of employees in the private sector are enrolled in a self-insured plan in Texas in 2020. 15% of this number are from firms with fewer than 50 employees, and about 68% are from businesses with 50 employees or more.
Self-insured health insurance is the health coverage that an employer offers its employees and their dependents in Texas.
Most companies in Texas offer self-insured health insurance through one of the following plans:
Typically, everyone needs health insurance in Texas. If your employer offers health insurance in the form of self-insured health coverage, you should consider getting it. You will not be excluded on the grounds of your medical history or for having a pre-existing condition.
Generally, a self-insured plan benefits both the employer and the employee. For an employee, you have access to a health plan that fits your needs. On the other hand, it provides cost and planning benefits for employers.
Texas employers that intend to self-fund their employees’ health coverage must consider the following:
Legal and regulatory requirements: Since the employer will be responsible for the health coverage, they must comply with the applicable laws and regulations. These laws include the Employee Retirement Income Security Act (ERISA), Health Insurance Portability and Accountability Act (HIPAA), Affordable Care Act (ACA), and other relevant federal laws.
Compare the benefits and costs: The benefits and costs of self-funding differ for small employers and large employers. Depending on the circumstances, self-funding may be more expensive than a fully-insured plan. Thus, an employer needs to find out if exploring self-funding is worth the risk and responsibilities.
Budget for unexpected claims: Employers should budget for shock and high utilization claims. This can be done by creating a fund for that purpose or getting a stop-loss policy.
Check provider discounts: Similarly to how insurance companies usually negotiate discounted rates with providers, self-funded employers should negotiate discounted prices with providers. For example, if an employee requires a $1,000 medical treatment, the employer can negotiate a 50% discount with the provider, resulting in a claim payment of only $500.
Overall, the employer determines the coverage of the plan. However, this decision is based on the information provided by the employee.
You can contact a licensed agent in Texas to look at your company’s self-insured health insurance plan.
You need self-insured health insurance as an employee because it offers custom-made health coverage. Being enrolled under a self-insured plan allows a company to design and carry out health plans that meet the needs of its employees. Thus, as an employee, you will have access to a health plan that considers your particular health needs. You can include vision, dental, and prescription as part of your coverage. Your employer may also switch the level of your coverage to prevent you from paying out of pocket for common procedures that are not part of your coverage. Some companies also include wellness programs to encourage their workers to live healthy lifestyles. In all of these, an employee will not be discriminated against based on their pre-existing condition or medical history. Also, the particular nature or terms of your plan will not be grounds for your employer to charge you higher premiums.
For an employer, it helps employers save money. An employer can save around 10-25% on non-claims expenses through self-funded insurance. They can also do away with state insurance premium taxes, coverage requirements, and other related costs. Furthermore, it affords an employer to make custom plans based on the nature of their work and their employees’ needs. For example, a construction company may want to cover the costs of chiropractic or physical therapy procedures to help with physical ailments. In addition, it provides an employer with the claims data of its employees. With the claims data of their employees, a company can predict and plan health expenses and create modified plans that suit that present roster. Over time, such data helps the employer manage benefits and control costs.
Your employer determines the cost and coverage of your plan under self-insured health insurance. You inform your employer about your health needs, which are then considered when creating your health coverage. Your plan is done specifically for your set of needs. Your employer will typically share the cost of your premium with you. If it meets the minimum standard value, your employer will cover 60% of your medical costs.
Deciding what self-insured insurance coverage you need largely depends on your medical or health needs. Your coverage may also be adjusted based on your needs every year. Discuss your options with your self-insured employer and/or a knowledgeable state-licensed health insurance agent familiar with self-funded coverage.
No, self-insured health insurance is not required by law in Texas. However, where it is implemented, it is regulated by federal laws, including:
The U.S. Department of Labor regulates self-insured health insurance. On the other hand, the TPAs that help administer self-insured plans are regulated by Texas law.
Self-insured health plans are characterized by their flexibility because they are designed to meet the unique needs of the company’s employees and are less regulated. In the process, a company can save on premium costs.
Most Texas companies hire a third-party administrator (TPA) to implement/set-up and administer self-insured insurance. TPAs are professional, state-licensed institutions that work on behalf of employers with various health providers. They provide expertise in establishing, administering, and managing self-insured plans. Third-party administrators typically play the role of an insurance company in a fully-insured plan. They create plans for the employees, handle claims, work with the employer, and contact health providers. These TPAs help companies save money and have experience with government laws and compliance regarding employee plans.
A standard health insurance plan, also known as a fully-insured plan, is centered on health insurance companies and involves an employer paying monthly premiums to their insurance provider that cover anticipated claims, administrative costs, and more. The insurance company pays the plan providers and keeps any money that is not spent as profit. In self-funded plans, the employer maintains the fund and keeps any funds that are not used. The TPA is in charge of payments to health providers, customer service, and claim processing. The bill is sent to the TPA after a visit to a provider, the TPA processes the claim, and the employer authorizes the TPA to pay claims.
An employer calculates the fixed and variable expenses of a self-insured health plan. Employers can use stop-loss or excess-loss insurance to mitigate the risk of self-insured plans by reimbursing the company for claims that exceed a certain level. This coverage can be used to pay catastrophic claims for a single covered individual or claims that are much higher than expected for a group of covered people.
The benefits covered by self-insured health plans usually vary depending on the employer and the needs of their employees.
The coverage of each self-insured plan varies depending on the company. Although the Affordable Care Act regulates self-funded plans, they are not required to provide all the essential health benefits. What is required is that the plan should have a Summary Plan Description (SPD), which provides the employer’s health plan’s terms and conditions, benefit coverage, and exclusions. Employers that offer self-insured plans may choose any state to use as their benchmark plan. However, they must not put lifetime or annual dollar limits on health benefits.
Generally, despite not providing essential health benefits, a self-insured plan may provide benefits that best meet the needs of each employee.
Self-insured health insurance is good for providing unique and comprehensive health coverage for the various employees of a company. Every employee can have a custom plan.
The employer determines the coverage benefits of a self-insured health plan. Hence, it may vary from employer to employer. However, certain benefits are required to be covered. They include inpatient services, outpatient services, and preventive services. Check with your employer’s Human Resources for more details about the available plans.
Self-insured plans cover the business owners, their employees and their dependents. For example, self-insured plans provide coverage to dependent children of employees. These children must be under 26 years. Both married and unmarried children qualify for coverage.
The items that self-insured plans cover usually depend on the company and its employees. For example, the employer for a physically demanding workload may want to cover the costs of chiropractic procedures and physical therapy, to help the employees stay fit for the job. Overall, most self-insured plans in Texas cover inpatient, outpatient, and preventive services.
There is no particular list of benefits that are not covered by self-insured plans in Texas. Plans have different restrictions on coverage, which is determined by the employer. Therefore, it is important to know your plan and what it covers. You can get this information by reading the Summary Plan Description section of your policy. You can ask your employer or a state-licensed health insurance agent to help you interpret it, if you do not understand the policy.
NOTE: Just like with every insurance, always read the exclusions section of the plan first.
There is no set list of things that are typically excluded in self-insured health insurance. Benefits that are excluded are determined by the company that offers self-insured plans. In some instances, Texas companies may exclude some of the following:
The following are examples of self-insured health insurance in Texas:
Generally, rather than an insurance company managing the investment and returns from premiums, the employer takes on the responsibility.
Large companies in Texas commonly use self-insured health insurance to provide their employees with health coverage. In the process, they are exempted from state regulations and taxes, reduce costs, save, and have access to the health information of their workers.
Self-insured health insurance and fully-insured health insurance are the two main ways private sector companies provide their employees with health coverage. A fully-insured health plan is the traditional way that employers provide health coverage for employees. Here, a company pays a fixed premium to an insurance company to provide the company’s employees with health coverage. The premium rates are set yearly depending on the number of enrolled employees in the plan each month, and they will only vary if that number changes. Employees must pay any deductibles or copays required for covered services under the policy, and the insurer pays claims based on the terms of the policy.
Self-insured health insurance is the health coverage that an employer offers its employees. The employer funds and manages the health plans and bears all the financial risks involved with providing benefits to their employees. The employer works with a TPA to provide these benefits. They calculate the fixed and variable cost of the plan. These costs vary monthly or annually, based on claims from employees and their dependents. Companies use stop-loss or excess-loss insurance to mitigate the risk of self-insured plans by reimbursing them for claims that exceed a certain level. This coverage can be used to pay catastrophic claims for a single covered individual or claims that are much higher than expected for a group of covered people.
Thus, companies that self-insure do not buy health insurance from an insurance company.
Fully insured plans are inflexible in that they prevent the employer from customizing health plans. Still, they are popular because they reduce the administrative responsibilities and costs associated with self-insured health plans. Because the insurance company is in charge of all employee claims, the employer’s risk is reduced. They are regulated by state laws and state regulatory bodies.
On the other hand, self-funded plans are more flexible because they are less regulated and allow the firm to tailor a healthcare plan to their employees’ specific needs. In addition, self-insured health plans save the employer a lot of money on premiums. Self-insured plans are exempt from state standards and are only subject to federal rules and regulations because they are not acquired from a state-licensed insurance company. Employers who self-fund health benefits can offer the same health plans in numerous states under this exception from state law.
While fully insured plans provide stability and security at a cost, the advantages of self-funded plans stem from their flexibility and lack of state regulations.
You only need one of either self-insured health insurance or marketplace health insurance. They are both major health plans that cover most of your health needs. If you already have a plan from the marketplace and you are offered a self-insured plan from your workplace, you should consider switching. In the same vein, if you are leaving your workplace’s plan, you should consider getting a plan from the health insurance marketplace. Either way, you should consult a licensed health insurance agent in Texas before deciding. They can evaluate your situation and help you decide on the best plan for you.
It depends. Generally, while your self-insured health plan covers your specific health needs or cost, sometimes it may not be sufficient. For example, some self-insured plans exclude regular dental or hearing coverage. Thus, if you need those services and your health plan does not cover them, you have to handle the cost yourself. If this happens, you should consider getting a stand-alone or supplemental health plan to cover the benefits left out of your plan and your out-of-pocket costs. If you need plans like this, contact a licensed health insurance agent in Texas. They can look at your self-insured plan’s terms, benefits, and cost-sharing and advise you on whether you need a stand-alone or supplemental plan.
A business, organization, company, firm, or institution that does not want to be fully-insured or that wants to be responsible for their employees’ health coverage.
Also, the employees of the business, organization, company, firm, or institution that is offering self-insured health plans can get it in Texas. Their dependents can also enjoy the benefits of the plan. It is best for employees of the organization, especially if they cannot find better coverage and they can handle the potential out-of-pocket costs from it.
A small or large business can self-fund its employees’ health coverage. By extension, the employees of the business that offers self-insured health coverage and their dependents qualify for self-insured health insurance.
An employer that wants to:
needs self-insured health insurance.
You should get self-Insured health insurance if you are an employer whose business has a high cash flow, you want to handle the health coverage of your employees.
First, let us look at the reasons why self-insured health insurance is good:
Note: Self-Funded health insurance is also known as Self-insured.
Autonomy and flexibility: Self-insured health insurance offers Texas companies and organizations flexibility to meet health care challenges and better manage health care costs. Self-insured health plans can be customized to meet specific company and employee needs. It gives employees a direct say in the customization of the health plan. Based on the recommendation of employees, employers may opt out of providing statutory benefits to provide benefits that better match the needs of their employees. They are not obliged to pick from a predetermined menu of plan packages supplied by a health insurance company. Instead, they have the freedom to construct their package. This further benefits multistate companies because they can provide their employees in different states or locations with customizable benefit packages.
In addition, a company can modify its contract with its TPA without impacting the employees’ health plans or providers. If the firm is fully covered, switching health insurers will result in significant changes for employees, including new cards and provider networks.
Cost: Self-funded insurance is less expensive than fully-funded insurance for both employer and employee. It eliminates needless expenses seen in most typical plans, such as gross premium taxes, administrative, and underwriting expenses. Self-funding eliminates the need to pay premiums based on community rates, which may be greater than the risk of your employee group.
Potential savings: Employers may save a lot of money with self-funded plans because it allows them to have more financial control. A company that adopts a self-insured plan can save up to 80% of its costs, including premium taxes charged by the state. With self-insured health plans, the company sets aside funds to handle insurance claims each year. At the end of the year, the total cost set aside is compared to the total claims paid out. The employer pays the plan administrator according to their agreement from the amount left. The employee can keep the remaining money. Here is an example:
|$150,000||Total amount set aside for claims for the year|
|- $100,000||Annual claims paid out from the amount set aside|
|= $50,000||Year-end balance|
From the $50,000 left, $15,000 is paid to the plan administrator for managing the plan. There will be $35,000 left, and the employer can keep this sum as savings, which can be added to the next year’s budget. This is in contrast to fully-insured plans, in which the employer does not expect or get any money at the end of the year.
Generally, self-insured health plans provide better benefits in a more flexible manner, enhance employee health and wellbeing, and cost less in the long run. More Texans than ever before are benefiting from a self-funded health plan, thanks to a variety of cost-cutting options and risk-shifting and risk-transfer mechanisms available.
Next, let’s identify the disadvantages of self-insured health insurance:
Other disadvantages of self-funded insurance include:
Yes, self-insured health insurance is worth it. It provides you with comprehensive healthcare in Texas. Most self-insured plans are partly sponsored by the employer, making them quite affordable for enrollees. The cost-sharing agreements of most self-insured plans are reasonable for the employee when compared with the benefits provided. They also do not discriminate based on your pre-existing condition. Furthermore, the plan’s benefits are usually tailored to meet the health needs of employees.
Self-insured plans allow Texas employers to:
If you are employed in a large company in Texas, you will be offered health coverage, either in the form of self-insured or fully-insured. Many small Texas companies (under 50 employees) also offer health insurance, either as self-insured or fully-insured plans, but they are not required by law to provide health coverage. So, if you do not have a self-insured plan, you are usually offered a fully-insured plan.
If you are not offered health coverage through an employer or affiliation, you need to get health coverage through a state-licensed insurance professional. Just ensure that you have health insurance because it is important. It will help you with the cost of your medical needs, and may give you access to preventive medical services
The most common health insurance plans in Texas are:
Speak with a licensed health insurance agent in Texas to learn more about available plans and the one that is best for you.
Self-insured health insurance is important because:
Since your self-insured plan comes from your employment and is sponsored by your employer, it is less likely that your self-insured health insurance will lapse. Your plan can only be terminated because your company decided to provide you with coverage through a fully-insured plan, or your employment was terminated. If the latter happens, you should consider talking to a licensed insurance agent in Texas to advise you on the best way forward, based on your health needs.