Self-funded vs. fully insured dental​

Self-funded dental coverage can offer employers a variety of advantages – increased flexibility, greater control over the amount spent on benefits, and a variety of options that can reduce administrative costs.

Although self-funded can be a win-win, some employers prefer the stability and risk control that comes with fully insured dental. There is no single right answer for everyone; each organization has to decide what works best for them.

Managing costs; maintaining control​

Do you prefer to have more control on your dental plan design, claim decisions and benefits administration? How willing are you to take on financial risk when it comes to claim costs — and do you fully understand the risk? Does your company have a predictable cash flow and claims history?

These are just a few of the questions that employers need to explore when they decide between self-funded and fully insured dental.

With a fully insured, traditional dental plan:

  • Companies pay a predictable monthly premium.
  • The insurance company assumes all financial risk in case claims exceed the predicted amount. They also provide a network of providers and handle benefits administration, customer service, claims processing and compliance, adhering to state regulations.​

Companies with fully insured plans can expect a level premium throughout the year and will have a more predictable cash flow. But in situations where the experience is better than expected, the benefit does not flow directly or immediately to the company.

With a self-funded dental plan:

  • Companies pay an administrative fee per month plus the claims paid. Reserves may be set aside that are based on a calculation of predicted costs. Companies have the freedom to determine a plan design that best fit their employee populations, without state filing and approval restrictions.
  • A third-party administrator is usually hired, with the expertise to handle benefits administration, claim processing and customer service, as well as provide a PPO network. This gives companies the ability to choose the most effective level of plan administration.  

Companies with self-funded plans have more control over administrative costs, but accept all funding risk and will need a reliable cash flow to handle claim costs which may vary from month to month.

Fully insured coverage offers a predictable monthly premium; self-funded coverage has a monthly administration fee plus the claims paid. Insurance companies assume risk for fully insured coverage; companies assume the risk for self-funded coverage. Insurance companies provide plan design options for fully insured coverage; companies have more control over administration costs and the freedom in plan designs for self-funded coverage. Fully insured coverage must adhere to state regulations and compliance; but no state filing and approval restrictions are required with self-funded coverage.