An Introduction to Self-Insuring Employee Benefits

Self-Insurance for employer sponsored medical benefits was facilitated in 1974 by the passing of the federal Employee Retirement Income Security Act. Since its enactment self-insurance has become more feasible to thousands of employers that have been able to design benefit programs to suit their employees.

Self-insurance enables companies to save premiums and therefore enhance their own financial performance. In addition it can also promote employee relationships as benefit plans can be tailor-made to suit a workforce's requirements.

Self-insuring employee benefits requires companies to develop their own benefit plans, tailored to suit their own requirements, appoint an administrator to pay claims and monitor the program. Self-insuring companies normally purchase stop-loss, or other forms of high-level insurance, to protect the company's assets.

Funds to pay for the costs of the plan are normally set aside into a trust arrangement where income can accrue, as funds are built-up, in a tax efficient manner. Today it is estimated that over 50 million U.S. citizens have employee benefits provided through self-insurance.