In a traditional fully insured health plan, your company pays a monthly premium, fixed for a year, based on the number of employees enrolled in the plan. The insurer collects the premiums and pays the health care claims based on the benefits in the policy you purchased. The covered persons are responsible to pay any deductible amounts or co-payments required for covered services under the policy.
The cost of a self-funded plan has fixed components similar to an insurance premium, e.g., administration fees, stop- loss premium, plus variable costs (the claims expenses). The administrative fees and stop-loss premiums are referred to as fixed costs and are billed monthly based on plan enrollment just like an insurance premium. These costs typically range between 15-25% of a comparable fully-insured premiums. Submitted and approved claims are then funded and paid by the employer/plan sponsor minus the insurance carrier markups (i.e. profits), reserve funding and state mandated taxes.
The Self-Insurance Institute of America estimates that “an employer can save 10–25% of total medical benefits costs by moving to a self- funded benefit plan.”
The regulatory complexities of the Patient Protection and Affordable Care Act (“ACA”), coupled with double-digit fully-insured health care premium increases, has created an environment where smaller employers (i.e. 50-500 employees) are effectively utilizing self-funding to minimize the administrative burden of offering comprehensive health benefits while controlling, and in many instances, reducing their overall healthcare costs.
Stop-loss medical insurance is a type of coverage that provides insurance protection to employers who choose to self-fund their employee health benefit plans. Sometimes, costly health disasters do happen.
The flexibility of self-funding helps employers use their health benefit plans the way they were originally intended – to attract and retain the finest employees in their respective industry.
As benefits administration specialists, Cook Group helps to design and document the plan, administer all claims on behalf of the covered group, and issue claims payments on behalf of the employer. When Cook Group establishes a self-funded plan for a smaller employer, we guide them to select appropriate levels of stop-loss or excess-loss insurance, which provides reimbursement for large catastrophic and/or a high frequency of claims. Stop-loss insurance protects smaller employers to allow them to pursue this economical approach to providing employee health benefits.