Self-Funding in Action – Part Three

Are you considering transitioning to a self-funded health plan? The third part in our “Self-Funding Basics” series explores more considerations for your group, and how to get started.

If you missed parts one and two, view them here and here.

How do I understand my costs?

Unlike traditional health insurance, which has fixed premiums, a self-funded plan will see variable costs. The total cost of a self-funded plan will include some fixed components, such as administrative fees and costs for stop loss insurance, along with actual claims expenses (less any stop-loss reimbursements for the period).

Employers should forecast “normal” claims experience based on past performance, and plan for known exposures. Less frequent, catastrophic claims – or an unusual increase in claims frequency – can be difficult to plan for, and is why most employers will purchase stop loss insurance.

What partners do I need?

Most employers sponsoring a self-funded plan will use a third-party administrator (TPA) to manage the plan and the costs, as well as a stop loss carrier to provide stop loss insurance. As with any partner you do business with, you want to have confidence in their experience and expertise.

  • Third-Party Administrator: The TPA should have the technical expertise to coordinate enrollment functions, claims payment, plan documents, and govern the management and administration of the plan.
  • Stop Loss Carrier: Not all carriers are created equal. Price should not be the only consideration – you should also look at policy offerings, the carrier’s financial stability and past experience, and their ability to tailor to your group’s needs.

What governance/compliance is involved?

Self-insured group health plans are federally governed, and must follow all applicable federal laws, including, but not limited to, the Employee Retirement Income Security Act (ERISA), Health Insurance Portability and Accountability Act (HIPAA), Consolidated Omnibus Budget Reconciliation Act (COBRA), the Americans with Disabilities Act (ADA), the Pregnancy Discrimination Act, the Age Discrimination in Employment Act, the Civil Rights Act, and various budget reconciliation acts such as Tax Equity and Fiscal Responsibility Act (TEFRA), Deficit Reduction Act (DEFRA), and Economic Recovery Tax Act (ERTA).

Switching from a fully-insured policy to a self-funded plan takes some time, but BCS is here to help! Contact us today to get started.