What Do You Know about Self Insured Group Health Plans?
What is a Self-Insured Group Health Plan?
Often referred to as a ‘self-funded’ plan, a Self-Insured Group Health Plan is one where an employer assumes the financial risk associated with providing health insurance to its employees. An employer that elects to “self-fund’ is opting to pay for every out of pocket claim that is incurred by employees. This contrasts with a fully insured plan in which the employer would pay a fixed premium to an insurance carrier.
Why Would and Employer Choose to Go Self-funded?
While every employer has their own reasons for choosing a self-funded insurance option, here are some of the most common:
- Employers do not have to pay for coverage up front to an insurance company. This can help create cash flow for their businesses.
- Employers are free to engage with Drs and provider networks that are best suited to the healthcare needs of their specific employee population.
- The employer can “tailor” their benefits offering to fit the specific needs of their employees. While using claims analytics systems and reviewing plan details employers can customize their plans as needed.
- Reserves not being used for current healthcare costs can garner interest for the employer which creates yet another line of cash flow.
- Employers who Self-fund are not governed by state law, but rather are regulated under federal law.
How Can a Self-Funded Employer Protect Themselves Against Large Medical Claims?
In order to protect themselves against large unforeseen and unpredictable claims, Self-Funded employers purchase what is known as Re-insurance. This is also referred to as Stop-Loss insurance and is designed to reimburse employers for large claims that go above a pre-determined dollar level. This is not a health insurance policy but rather a legal contract between the stop loss carrier and the employer.
How Are Claims Administered on A Self-Insured Group Health Plan?
While some Self-funded employers handle all the administration of employee claims themselves, most choose to outsource this elsewhere. A Third-Party Administrator or TPA for short, is used to process claims, provide data on claims and trends, coordinate the stop-loss coverages, work on provider network contracts and more.
What Law Are Used to Regulate Self-Insured Plans?
As mentioned previously, Self-funded insurance plans to not fall under local or state law. They are instead regulated by federal law under the Employee Retirement Income Security Act (ERISA). Other agencies such as the ADA, COBRA, HIPAA and DEFRA are also used to oversee and regulate these plans federally.