What is a self-funded insurance plan?

A self-funded health plan is an arrangement where the employer assumes some or all of the risk for providing health care benefits to their employees. The employer controls the plan allowing for greater flexibility in all areas of the plan.

How does a self-funded plan reduce costs?

In a traditional plan, the employer pays an insurance company a premium on a monthly basis. The insurance company builds a claims and administrative reserve for that group. At the end of the plan year the insurance company keeps any funds left in that reserve account.

In a self-funded plan, the employer pays into a claim reserve account. The amount is determined by anticipated claims. At the end of the plan year, any funds left in the account belong to the employer - not an insurance company.

How can an employer limit the risk of exposure to too many claims?

Self-funded plans are protected by reinsurance purchased to guard against claims that exceed a specified amount. This is commonly call stop-loss insurance. Under normal circumstances, the plan's claims reserves are adequate to cover employee claims; however, an unforeseen catastrophic claim could cost more than is budgeted in the plan and place undue financial burdens on the employer. Stop-loss coverage protects the plan from these excess losses.

How does stop-loss coverage work?

There are two types of stop-loss coverage. A self-funded plan is covered by both of these coverages.

· Specific coverage insures against a single catastrophic claim that exceeds a dollar limit agreed upon by the employer and the stop-loss carrier. If a covered employee had a catastrophic claim that went over the agreed upon limit, specific coverage would reimburse for all covered expenses beyond that limit.
· Aggregate coverage insures against a possibility that the total of all employee claims payable during the plan year will exceed an agreed upon limit.

In these two coverages, the employer has provided a limit on the total claims exposure.

Who will take the place of the insurance company to administer the plan?

A self-funded employer elects a TPA (Third Party Administrator) to administer the plan.

TPA services offered by Hillcrest Benefit Administrators, Inc. include:
· Plan design consulting
· Reinsurance or stop-loss coverage
· Claims administration
· Contracting with managed care providers
· Preparing handbooks and other plan documents
· Billing
· Customized client reports
· Medical case management

Who should I contact for more information about the benefits of self-funding?

Hillcrest Benefit Administrators, Inc. has the experience and expertise to guide you in your benefit program decisions. We can help you determine whether self-funded or traditional coverage is better suited to your company's needs. Then we'll work with you to set up a benefits package designed to meet your specifications.

Hillcrest Benefit Administrators is dedicated to quality service. Our insurance professionals have built their reputation by working harder to provide and manage health plans that work better for you and your employees.

We believe self-funded health coverage through Hillcrest Benefit Administrators is the best choice for cost-conscious employers who want better control over their benefits and the long-term security that today's self-funded plans can provide.