What to look for in a Self-Funding Plan for a Small Business:
Stop-Loss Protection – If covered medical claims are higher than the amount of money funded in the claim pre-fund account, employers are protected with stop-loss insurance.
- Specific Stop-Loss – Protects you if an employee or dependent claims exceed a specified amount per participant. The stop-loss insurance pays claims exceeding this amount for the remainder of the contract year.
- Aggregate Stop-Loss- Provides additional protection if total claims for all employees and dependents exceed a defined amount, or aggregate attachment point. If claims exceed this amount, the stop-loss insurance pays additional covered claims for the remainder of the contract year.
You make a set monthly payment, which includes:
- Funds for claim expenses up to a predetermined amount (referred to as the aggregate attachment point)
- Stop-loss premiums
- Administrative expenses
Your funds for claim expenses are deposited into a designated bank account to pay expected claims. Covered expenses are paid on your behalf using your funds from this account.
- Specific Stop-Loss Accommodation (SPEC Advance)
- Aggregate Stop-Loss Accommodation (AGG Advance)
- If there is not enough accumulated in the claims fund at the time of a claim, the stop loss carrier advances the health plan the amount required to pay the claim.
These Plan Features allow for set monthly payments – Employers pay a set amount each month for the duration of the contract, regardless of claim activity, which means they can manage their budget easier (just like Fully Insured).
Self-Funding Plans have many advantages, including:
- Flexible plan designs that are similar to fully insured plans with a choice of attractive options to meet the needs and budget of employers.
- The opportunity for a refund – Employers retain the surplus if claim expenses are lower than funded.
- Long-term savings – ERISA self-funded plans are not required to cover costly state-mandated insurance benefits, which helps control healthcare costs.
- Savings on state premium taxes – Self-funded claim dollars are not subject to state health insurance premium taxes, which provides employers with direct savings.
- Claim activity reporting – Healthcare utilization reports provide transparency of healthcare costs to show how the claim dollars are being used.