Funding comes through establishment of a trust or a simple reserve account. As with other health care plans, the employee may pay a portion of the cost in premiums. Catastrophic coverage is usually provided through a stop loss policy, a type of coinsurance purchased by the company. The plan may be administered directly by the company or through an administrative services contract. The advantages of self-insurance are listed below.
Programs can be flexible.
They are designed to reflect employee needs, including medical and dental care, prescriptions and so on. Mandated benefit laws and state insurance premium taxes do not affect these plans. The employer retains control over the timing and amount of funds paid into the plan and can manage costs more directly. Administration of these plans can be more efficient. Over time, these plans can save money.