Funding Strategy Matters: Self-Funded vs. Fully Insured

When helping clients build a dental benefits strategy, one of the most important and often overlooked decisions is how the plan is funded. As costs continue to rise and employers become more focused on long-term value, comparing self-funded vs. fully insured models is key. Each funding mechanism offers unique advantages, and choosing the right one depends on the organization’s size, financial goals, and risk tolerance.

Fully insured: predictable and simplified

Fully insured dental plans offer employers the security of a fixed monthly premium. The insurance carrier assumes the financial risk for claims, so whether usage is high or low in a given year, the employer cost stays the same. This model is often favored by smaller or risk-averse organizations looking for budgeting predictability and administrative simplicity. Built-in services like claims processing, compliance oversight and customer support are typically bundled into the plan.

However, this predictability comes with trade-offs. Premiums are priced based on projected claims and include margins for carrier risk, overhead, and profit, meaning employers may pay for coverage they don’t use.

Self-funded: flexibility and control

Self-funded arrangements are gaining traction, especially among larger employers. According to market insights, over 30% of all groups with more than 500 lives now use a self-funded dental model. The drivers behind this shift include cost containment, cash flow control and the ability to customize benefits more effectively for their workforce.

In this model, employers pay for actual claims as they occur, while the insurance carrier or third-party administrator handles the administrative side: processing claims, managing the network, and ensuring compliance. This gives employers greater flexibility in plan design and deeper visibility into how the plan is being used.

The power of data transparency

Self-funded plans may also unlock powerful data insights, a growing priority for employers focused on overall health outcomes. Ameritas partners with population health companies to use medical insights, connecting dental benefits to overall health outcomes. This may help identify early patterns, such as connections between periodontal disease and chronic health conditions like diabetes or cardiovascular issues. This transparency isn’t just about seeing the data; it’s about acting on it. With advanced tools and partnerships, employers can make more proactive decisions that improve both health outcomes and cost efficiency over time.

Helping clients choose the right fit

No single funding model is right for every client. When guiding employers through this decision, it’s important to consider:

• Size of the employee base: Larger organizations may typically be better suited for self-funded models due to more predictable claims trends. Smaller employers may prefer the stability of fully insured plans.
• Risk tolerance: Self-funded plans come with variability. Employers who are comfortable with financial risk and want to avoid paying for unused services may favor self-funding. Fully insured plans offer consistent monthly costs.
• Cash flow needs: If predictable budgeting is a top priority, fully insured may be more appropriate. Self-funding provides long-term savings potential but requires managing month-to-month claim variability.
• Administrative capacity: Self-funded plans often require more oversight. Employers with limited HR resources may lean toward fully insured options where most services are handled by the carrier.

Your role as a strategic advisor

As the benefits landscape evolves, consultants have an opportunity to go beyond quoting and become strategic funding partners. By understanding client goals and helping them weigh the pros and cons of each funding model, you can guide them toward a solution that fits both their budget and their long-term vision for employee health. For a deeper dive into trends and data insights driving funding strategy shifts, review the 2024 Ameritas Dental Market Report.

Sources and References:
ADA: Dental Services Affected by Country’s High Inflation (2022)
Artemis Health (2022)