VeraSource provides stop loss insurance for self-insured ERISA
plans to Third Party Administrators (TPA's) and employee benefits
brokers. We are proud of the quality insurance carriers we represent
and the competitive rates they offer.
| Q. | What is a self-insured health
plan? |
| A. | A self-insured group health plan
(or a 'self-funded' plan as it is also called) is one in which
the employer assumes the financial risk for providing health
care benefits to its employees. In practical terms, self-insured
employers pay for each - out of pocket - as they are incurred
instead of paying a fixed premium to an insurance carrier, which
is known as a fully-insured plan. Typically, a self-insured
employer will set up a special trust fund to earmark money (corporate
and employee contributions) to pay incurred claims. |
| Q. | How many people receive coverage
through self-insured health plans? |
| A. | According to a 2000 report by
the Employee Benefit Research Institute (EBRI), approximately
50 million workers and their dependents receive benefits through
self-insured group health plans sponsored by their employers.
This represents 33% of the 150 million total participants in
private employment-based plans nationwide. |
| Q. | Why do employers self fund
their health plans? |
| A. | There are several reasons why employers choose the self-insurance
option. The following are the most common reasons: - The employer can customize the plan to meet the specific
health care needs of its workforce, as opposed to purchasing
a 'one-size-fits-all' insurance policy.
- The employer maintains control over the health plan reserves,
enabling maximization of interest income - income that would
be otherwise generated by an insurance carrier through the
investment of premium dollars.
- The employer does not have to pre-pay for coverage, thereby
providing for improved cash flow.
- The employer is not subject to conflicting state health
insurance regulations/benefit mandates, as self-insured
health plans are regulated under federal law (ERISA).
- The employer is not subject to state health insurance
premium taxes, which are generally 2-3 percent of the premium's
dollar value.
- The employer is free to contract with the providers or
provider network best suited to meet the health care needs
of its employees.
|
| Q. | Is self-insurance the best
option for every employer? |
| A. | No. Since a self-insured employer
assumes the risk for paying the health care claim costs for
its employees, it must have the financial resources (cash flow)
to meet this obligation, which can be unpredictable. Therefore,
small employers and other employers with poor cash flow my find
that self-insurance is not a viable option. It should be noted,
however, that there are companies with as few as 25 employees
that do maintain viable self-insured health plans. |
| Q. | Can self-insured employers
protect themselves against unpredicted or catastrophic claims? |
| A. | Yes. While the largest employers
have sufficient financial reserves to cover virtually any amount
of health care costs, most self-insured employers purchase what
is known as stop-loss insurance to reimburse them for claims
above a specified dollar level. This is an insurance contract
between the stop-loss carrier and the employer and is not deemed
to be a health insurance policy covering individual plan participants. |
| Q. | Who administers claims for
self-insured group health plans? |
| A. | Self-insured employers can either
administer the claims in-house, or subcontract this service
to a third party administrator (TPA). TPAs can also help employers
set up their self-insured group health plans and coordinate
stop-loss insurance coverage, provider network contracts and
utilization review services. |
| Q. | What about payroll deductions? |
| A. | Any payments made by employees
for their coverage are still handled through the employer' s
payroll department. However, instead of being sent to an insurance
company for premiums, the contributions are held by the employer
until such time as claims become due and payable; or, if being
used as reserves, put in a tax-free trust that is controlled
by the employer. |
| Q. | With what laws must self-insured
group health plans comply? |
| A. | Self-insured group health plans
come under all applicable federal laws, including 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). |
