There is a big difference between being self-funded and self-insured. Benicomp, Inc. does not recommend becoming self-insured. Under a self-insured plan, the employer is responsible for all claims filed under the plan. Under a self-funded plan, the employer pays employee benefit claims only up to a predetermined level. Stop loss insurance is obtained to cover claims that exceed the actuarially anticipated claim levels. Specific stop loss insurance protects the plan against an individual catastrophic claim. Aggregate stop loss insurance protects the plan against total claims exceeding a given amount on the entire covered group, thus limiting overall claim cost exposure to a predetermined level. Benicomp, Inc. only represents stop-loss carriers that have met high quality standards for financial ratings, stability, claim payment and renewal practices.

Self-funding is a cost effective structure for paying claims. It is a means whereby the insurance company assumes its proper role - one of retaining the risk only for those unexpected claims, in excess of a predetermined amount. Claims less than this amount, which are predictable, are funded by the employer. Because claim reserves can be managed by the employer, the employer maintains greater financial control over their cash flow. Funds remain in each employer's established claim account and are transferred to the claim account only when needed to pay claims ("pay-as-you-go" basis) or may be transferred automatically each month ("fully-funded" basis), very similar to a “Budget Plan”. This method allows for a more consistent cash flow plan for companies.

While some of the savings commonly realized from self-funding are created by improving plan design and claims administration functions, the employer also saves costs through other features of the plan:

• State premium tax, usually 2% to 4%, does not generally apply to self-funded claim funds.
• TPA fixed fees to manage the plan are substantially lower than insurance carriers' for the same service.
• Insurance carriers' profits and risk charges are reduced.
• State pooling charges are eliminated.
• Insurance company's reserve requirements are eliminated.
• Self-Funded programs are regulated at the federal level under the Employee Retirement Income Security Act of 1974 (ERISA), thus avoiding costly benefit procedures often mandated by state regulations.