"Offering an Alternative to Traditional Health Benefits, Delivered With a Heart for Service"
Self-Funding Health Benefits
What is Self-Funding
•An alternative funding mechanism to buying traditional fully insured health insurance.
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•Unbundled: Deliver Each Part In Most Efficient Manner.
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•Employer Pays for Claims Instead of Paying for Premiums.
- Claims: Employer Budgets
- Risk: Employer Insures
What About the Risk
How Prevalent is Self-Funding
Why Self-Fund
•Lower fixed insurance costs
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•Eliminates most state premium taxes
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•Reduces insurance carrier risk charges and profit margins
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•Better manage variable claim costs, improve cash flow
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•Fund claims on a level basis or as incurred
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•Reserves held by the employer, not by an insurance carrier
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•Control over plan design and healthcare spend
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•Coverage governed by federal ERISA* Law not states’ regulation
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•Greater control over the delivery of healthcare
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•Tailor plans to meet member needs and wants
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*Self-funding was made possible by the passage of the Employee Retirement Income Security Act of 1974 (ERISA).
Self-Fund Plan
What Makes Up a Self-Funded Plan.
How Self-Funding Works
•The employer decides on a plan of benefits with the assistance of an agent or broker and sometimes a third-party administrator (TPA). This plan is often like the plan currently provided on an insured basis.
•Stop Loss insurance is arranged to protect the plan against extreme losses. The amount of risk to be insured will be a function of the employer's size, nature of business, location, plan of benefits, financial resources, prior experience and tolerance for risk.
•A plan document is prepared. The plan document contains all the provisions of the plan, including eligibility, coverage and termination. Employee benefit descriptions, identification cards and other materials necessary to operate the plan are also prepared, usually by the TPA.
•The TPA operates the plan. This includes maintaining proper funds on deposit so that claims can be paid, paying the claims, preparing special claim reports and other required data for the plan and the insurer, and preparing any required government reports. The TPA also bills and collects any premiums and other administrative fees for the plan.