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» What is a Self-Funded Voluntary Benefit Plan?

May 2, 2023

Benefits Administration, Business Strategies, Captives, Healthcare Innovation, Healthcare Spending, Self-Funding

You are probably familiar with voluntary benefits – if you’ve watched a sports game or turned on the TV recently, you’ve probably seen an ad from Aflac, Allstate, and others.

But you may not be familiar with how these plans are financed exactly. And if you’re a real finance and insurance nerd who is familiar with self-funding, you may even wonder “Can we self-fund our voluntary benefits like we self-fund our health plan?”

The answer to that question is “Yes, you can in fact self-fund your voluntary benefits!”

As is often a solution for small- and mid-sized employers, we turn to captive insurance to manage the risk of a self-funded voluntary program.

If you’re here then you’re probably familiar with the advantages of offering a voluntary benefits program. But as a short summary, voluntary benefits, otherwise known as worksite benefits, are popular with employers and employees of all sizes because:

  • Voluntary benefits are usually 100% employee paid so there’s no cost to the employer
  • Employees can customize their program by buying the insurance they want for the risks that keep them up at night
  • Premiums can be tax-deductible to employees if proper steps are adhered to
  • Employees can receive cash benefits for covered conditions which help them pay their cost-sharing in the health plan
  • Guaranteed issue policies mean everyone can get one. Beware of pre-existing exclusions though!

Examples of popular voluntary benefits include:

  • Life insurance
  • Short- and Long-Term Disability
  • Long-Term Care
  • Cancer
  • Accident
  • Critical Illness

While these voluntary plans are very popular with employees and employers, the fact is that we don’t get great data on claims and utilization. When one side of the table is sponsoring Super Bowl ads and appearing on your TV frequently, it’s fair to assume the carriers are doing okay in this market.

In our interest of compressing the value chain, or bringing lower-cost solutions to employers, we look at self-funding not just for health plans, but for voluntary benefits as well.

This means we help employers join a pool of other, like-minded businesses, who are looking to offer differentiated and attractive benefits at a fair cost. These employers contribute premiums into the pool every year, and withdraw from the pool as claims are incurred and paid to employees. If there is money left over at the end of the year, then a surplus may be distributed to employers on a pro-rata basis as a return of unused premiums.

Thes plans may include accident, hospital, cancer, and critical illness policies, and may be designed with various benefit amounts to suit your population.

If you’re interested in learning more about how to self-fund your voluntary benefits program, click here to speak with a benefits consultant today!


Posted by in Benefits Administration, Business Strategies, Captives, Healthcare Innovation, Healthcare Spending, Self-Funding