Self-Funded Health Care

Self-funded health care is a self insurance arrangement whereby an employer provides health or disability benefits to employees with its own funds. This is different from fully insured plans where the employer contracts an insurance company to cover the employees and dependents.

In self-funded health care, the employer assumes the direct risk for payment of the claims for benefits. The terms of eligibility and covered benefits are set forth in a plan document which includes provisions similar to those found in a typical group health insurance policy. Unless exempted, such plans create rights and obligations under the Employee Retirement Income Security Act of 1974 (“ERISA”).

Reference Based Pricing

Reference Based Pricing plans paired with a Self-Funded Healthcare plan can offer innovative plan designs so employers & employees can mitigate healthcare costs. Reference-based pricing reimburses providers based on a multiple of Medicare. This strategy all but eliminates the traditional network driving savings by avoiding network contracts.

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Due to the increased employee & employer education necessary with these plans, successful implementation requires an increased level of planning. When implementing a reference-based pricing plan, choosing and experienced vendor is important along with an experienced broker who can guide you and your company properly.

Stop Loss Insurance

Many employers seek to mitigate the financial risk of self funding claims under the plan by purchasing stop loss insurance from an insurance carrier.

These policies typically provide for risk retention limitations both on a specific claim and aggregate claims basis. An important aspect of self funded group health plans lies in the requirement that the employer remain liable for funding of plan claims regardless of the purchase of stop loss insurance.

What this means, in turn, is a fund or company’s own bank account creates a pool of their employees and is managed & distributed to claim payouts. In other words, only the employer has a contractual relationship with plan participants and beneficiaries.