- Self-funded health care
health caredescribes a self insurance arrangement whereby an employerprovides healthor disabilitybenefits to employeesby assuming the direct riskfor payment of their claimsfor benefits. The terms of eligibilityand coverageare set forth in a plan document which includes provisions similar to those found in a typical group health insurancepolicy. Unless exempted, such plans create rights and obligations under the Employee Retirement Income Act of 1974 ("ERISA").
Many employers seek to mitigate the
financial riskof self funding claims under the plan by purchasing stop loss insurance from an insurance carrier. These policies typically provide for risk retention limitations both on a specific claim and aggregate claims basis. An important aspect of self funded group health plans lies in the requirement that the employer remain liable for funding of plan claims regardless of the purchase of stop loss insurance. In other words, only the employer has a contractual relationship with plan participants and beneficiaries. The stop loss policy runs solely between the employer and the stop loss carrier and creates no direct liability to those individuals covered under the plan. This feature provides the critical distinction between fully insured plans (subject to State law insurance regulations) and self funded health plans which, under the provisions of Section 514 of ERISA, are exempt from State insurance regulations.
Stop loss policies should be distinguished from "
reinsurance" arrangements. Under reinsurance arrangements, one insurance carrier cedes risk to another carrier to lessen its risk. Reinsurance arrangements fall under specific State insurance regulations designed to assure the financial integrity such arrangements.
While some large employers self-administer their self funded group health plan, most find it necessary to contract with a third party for assistance in claims adjudication and payment. Third Party Administrators provide these and other services, such as access to preferred provider networks, prescription drug card programs, utilization review and the stop loss insurance market.
Insurance companiesoffer similar services under what is frequently described as "administration only" contracts. In these arrangements the insurance company provides the typical third party administration services but assume no risk for claims payment.
"Self-Funded Health Care Could Lower Costs" - Milwaulkee Biz Journal [http://www.bizjournals.com/milwaukee/stories/2006/02/27/focus4.html]
"Is Self-Funded Health a Path for Small Firms?" - HR Magazine [http://www.shrm.org/hrmagazine/articles/0806/0806SRwoodward.asp]
"Self-Funding of Health Care Benefits" [http://eservice.ifebp.org/site/vision_productsearch.asp?TrackID=&VID=&CID=&ABSTRACTQTY=&DID=&page=1&MODE=2&PRODUCT=5670] by
"ERISA Group Health Plan Administration", Health Plan Law [http://www.healthplanlaw.com] ,
Medical care ratio
Arlington County v. White
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