In a traditional insured health plan, rates are fixed for a year and monthly premiums are based on the number of employees enrolled. The insurer collects the premiums and pays the health care claims based on the policy’s benefits. Plan participants are responsible for deductibles and co-payments.
In a self funded health plan, fixed costs such as administrative fees are billed monthly based on plan enrollment but the employer pays claim costs as they are incurred. Stop loss insurance reimbursements are made if claim costs exceed the catastrophic claim levels in the policy, making the total equal to fixed costs plus claims expenses less any stop loss reimbursements.
In virtually all self funded health plans, the employer does not assume 100% of the risk for catastrophic claims. We help employers buy stop loss or excess loss insurance to reimburse the plan for claims that exceed expected levels. When claim costs are below expected levels, the savings remains with the employer and not an insurance company.
Self funding can provide the flexibility to design a plan that is best suited for your organization and your plan participants. The information gained will help you better manage the risks and future costs of health care.