Partially Self-Funding is the unique answer for employers trying to save money on the cost of health insurance. Partially self-funded programs are usually established by a TPA who has pre-established vendors who will manage all aspects of the health plan including, account management, the prescription drug plan and stop-loss carrier(s). Employers are given a lot of flexibility to how their plans are designed, including selecting which provider network to use (ie. Aetna, Cigna/Great West, etc.).
Another difference made by partially self-funding is in the name. The employer will have a fixed set of premiums for the entire policy year. For example they will pay a fixed amount for administration fees, individual stop-loss, aggregate stop-loss and funding for the claims account to give a total fixed cost per employee and dependents.
Some of the characteristics of partially self-funding are
- Competitive rates
- Up to 12/21 Contract basis
- Internal pooling point maximizes potential for employer refund
- Most industries are eligible
- Group sizes are typically between 10-200 employees
- Unused claims funds are paid back to the group based off of the original contract with the TPA (50% is typical)
- Stop Loss insurance offers full protection from larger claims. Employers will never have to pay more than the maximum monthly cost
- The predictability of a fixed monthly cost-there are no extra charges if there are high claims
- ERISA plan that is exempt from some of the new federal Affordable Care Act regulations and taxes that equals more in premiums
Below are illustrations of how partially self-funded works when utilization is normal and when utilization is high.