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In the traditional fully-insured plan, the insured pays a pre-determined flat monthly premium in exchange for full insurance coverage for a variety of specified services. As the cost of administering the insurance plan and the insurance company's losses due to claims and rising medical care costs increase, the insurance company is forced to increase the annual premiums. Frequently when the premiums begin increasing, they never stop. Thus, the premium payer (generally the employer) is at the mercy of the insurance company. With virtually no recourse, you should expect to pay the additional premium costs year after year after year. Basically, the premium payer is really paying premiums for their own medical claims, as well as, other insured's claims. Once this cold, hard fact is realized, self-funding becomes an extremely viable alternative.
By
self-funding, the employer establishes a maximum individual
stop-loss point and also a maximum aggregate stop-loss point beyond
which the employer's chosen insurance company assumes the liability
for covered claims. The plan requires two insurance contracts.
The first contract, known as Specific Stop Loss Coverage is
an insurance contract which stipulates that the employer will pay
for all covered health care expenses for each covered individual
(employee or dependent) up to specified dollar limit. This
dollar limit will be selected by the employer based upon actuarial
recommendations and anticipated cash flow patterns throughout the
coverage period. This
Specific Stop Loss Coverage is generally thought of as a deductible
which the employer pays on behalf of each employee or dependent
insured. After meeting the specified dollar limit, the financial
liability for each individual insured's future health care costs are
transferred to the re-insurer (the selected insurance company).
This re-insurer assumes liability for claims up to a pre-determined
lifetime maximum, usually $2,000,000 per person. The
second contract, Aggregate Stop Loss Coverage, is an
insurance contact which stipulates that the employer will assume
financial liability for the aggregate cost of claims which do not
exceed the specified dollar limit (stop-loss point) up to a maximum
pre-determined expenditure. This maximum expenditure is determined
by applying an actuarial formula to the paid claims experience of
your entire group. The
self-insured approach is relatively simple after you understand the
terminology and how the plan works on a day-to-day basis. The bottom line is that
self-funded plans will save you a tremendous amount of money. BMS
will be glad to answer any questions you may have and direct you to
the best plan design for your situation. _____________________________________________________ Benefit Management Systems, Inc. P. O. Box 2058 · Madison, MS 39130-2058 1212 HWY 51 N · Madison, Mississippi telephone: 601.856.9029 · fax: 601.856.9365 _____________________________________________________ designed and produced by Promotions PLUS, Inc.
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Under
the self-funded benefit plan approach, the employer enjoys much
greater cost controls and cash flow improvements by self-insuring
the expected costs (those costs that are easy to budget) and
allowing an insurance company to assume the unknown risk (those
costs that are virtually impossible to budget). Any funds
ear-marked for claims that are not utilized by the plan are retained
by the employer - instead of becoming the insurance company's
profits.