Stop-Loss Insurance - Specific, Aggregate & ASO Claims & Risk
Mgt. Services
Self-Funded Benefits Plans - An Overview, by Paul M. League,
QFP, CFP®
The key advantage to Shared
Self-Funding your employee benefits is that claims (if any) are not paid
or funded, until after they have actually been incurred. With
traditional, fully insured arrangements, you are charged a "loaded
premium" which includes all of the fees of a Self-Funded plan PLUS
"projected" claims, PLUS an added charge for the Insurer’s "claims
reserve" to further protect them. These charges are the same whether the
Insurer pays one million in claims or only $1.00! With a traditional,
fully insured plan, you don’t receive any refunds from the premiums you
have spent even when your claims experience is very good. In other words,
if your claims are under the projected claims levels, the Insurer returns
no money to you. If the claims exceed their projections the Insurer will
simply give you a greater increase in rates than inflationary trending
would have otherwise required. In either scenario you lose with a
traditional, fully insured, plan.
Shared Self-Funding
(sometimes also referred to as "participatory funding") puts you in the
drivers seat. It does this by first allowing you to self design your own
plan of benefits, and more importantly it does this by not requiring you
to pre-pay insurance claims that may never occur. Of course when claims do
occur then the Shared Self-Funded plan provides Specific Stop Loss
Insurance to cover individual employee shock claims in excess of an agreed
upon deductible amount, and it provides Aggregate, or "overall" Stop Loss
Insurance, to protect your total claims in a worst case claims scenario =
"Shared".
Shared Self-Funding is
generally best suited for an employer groups of 100+ lives, with multiple
State locations (due, in part, to its total or partial ERISA exemption, as
the case may be, from State benefits requirements), who must meet the
diverse needs inherent in most large, growing employer groups. It is
further considered the vehicle of choice in a case where the employee
population is young, the industry is white collar, and the company is in a
good growth mode. After all, you hire healthy employees, not sick ones;
therefore, your chances for minimal claims is greatest when you are on the
grow and your employees are, on average, young & healthy. In a plans first
year there is the extra advantage of an initial claims lag period, or
buffer, of 90 days or more. This "claims lag," and general lack of claims
activity, serve to deliver significant cash flow advantages to your
business allowing you to keep money in your company that would otherwise
be paid out in unrecoverable "loaded premiums" if you were instead to
enroll in a traditional, fully insured, program. Claims are not constant,
with some years higher than others; however, since employer’s have Health
Insurance for the long term (i.e. the life of their business) most prefer
to be in a position of control over the components of their Health plan
rather than subject to the dictates of an outside Insurer that only has
its own selfish profit motives in mind.
With Shared Self-Funding
you have the control over benefits (with few Federal and State Law
exceptions), control over your premiums/cash flow, and therefore control
over your plans overall "cost" in those times when claims are lower & with
appropriate types of Insurance for those times when claims are higher.
Only Shared Self-Funding offers you control of your destiny, and that’s
real "Health Care Reform".
Shared Self-Funding is the
approach most often used by fortune 5000 companies and many other
successful and growing companies. Contact us for a look at the various
components and pricing structures that MAY be used by you in the design of
your plan. All of these components are variable; again, you have the
control. You can pick your benefits, your TPA (Claims Administrator), your
Utilization/Specialist Referral service, your Insurer/Underwriter, your
EPO/PPO, etc. The choice is yours!
We trust that the
recommendations we make will be suitable for you but want you to
understand that we are here to adjust any of the variables as you see fit
to help to create a customized Plan most desirable for you and your valued
employees.
Disclaimer: The material discussed
herein
is meant for general illustration or informational purposes only and is
not to be construed as investment advice. Although the information has been gathered from sources believed to
be reliable, it is not guaranteed. Please note that individual situations
can vary; therefore, the information contained herein should be relied upon only when
coordinated with individual professional advice. We are not licensed for
and therefore do not provide tax or legal advice.
About
the Author: Paul M.
League, QFP, CFP® is the Founding Principal of both League Financial & Insurance
Services (www.LeagueFinancial.com) & League Financial Services (www.LeagueFS.com),
which are privately held companies
located in Palm Desert, CA.
Paul and his companies specialize in assisting clients to
create, expand & preserve assets. Contact Information: Paul M. League, QFP, CFP®, P.O. Box
11800, Palm Desert, CA 92255-1800 · 800.482.5347 ·
Info@LeagueFinancial.com.
©Paul M. League. All Rights Reserved.
