Having access to quality health care is important, and self-insured health plans enable employers to tailor health plans to their market. Knowing if your health plan is self-insured or fully-insured is important, as it determines who you need to contact to file claims or whom to ask for help if a claim is denied.
Function
A self-insured group health plan, or self-funded health plan, is a health plan in which the employer assumes responsibility for the financial risk of providing health care benefits to their employees. The employer pays every out-of-pocket claim instead of paying a fixed premium, or fully-insured health plan, to the insurance company. The Self-Insurance Institute of America states that a study done in 2000 by the Employee Benefit Research Institute (ERBI) indicates approximately 50 million workers and their dependents receive benefits through a self-insured group health plan sponsored by their employers.
Advantages
Employers are able to tailor their health plan to meet the health care needs of their employees in lieu of purchasing a standardized plan. The employer also has control over health plan reserves, which gives it control over their interest income. Cash flow is improved because the company does not have to prepay for health coverage. The self-insured health plan falls under federal regulation (ERISA), so the company does not have to follow state health regulations. The company also does not have to pay state health insurance premium taxes.
Considerations
The company takes the risk of having to pay for the health care claim costs for employees, so the company must have access to money to cover incurred costs that can be unpredictable. Self-insurance may not be an option for smaller companies due to cash flow issues. Because the insurance is regulated by the federal government in place of the state government, denied claims are harder for plan members to fight, reducing the occurrence of lawsuits.
Laws
According to the Self-Insurance Institute of America, self-insured group health plans come under all applicable federal laws, including the Employee Retirement Income Security Act (ERISA), Health Insurance Portability and Accountability Act (HIPAA), Consolidated Omnibus Budget Reconciliation Act (COBRA), Americans with Disabilities Act (ADA), the Pregnancy Discrimination Act, the Age Discrimination in Employment Act, the Civil Rights Act and various budget reconciliation acts such as Tax Equity and Fiscal Responsibility Act (TEFRA), Deficit Reduction Act (DEFRA), and Economic Recovery Tax Act (ERTA). If a claim is denied, it can be appealed at the Department of Labor (DOL) under your ERISA rights.
Stop-Loss Insurance
Stop-loss insurance, or excess insurance, protects the company against catastrophic and unpredictable losses. Stop-loss insurance is a separate insurance plan that employers with self-funded insurance can purchase to avoid complete liability for any losses arising from the self-funded insurance plans. Stop-loss insurance covers losses that occur after the deductible is met.
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