Introduction
Partial self-funding provides employers with an alternative way to combat the negative impact of rising costs, saving employers the difficult decision of stripping benefits from their valued employees.
Rather than obtaining medical coverage from an insurance carrier, the employer elects to fund the risk up to a certain level where a Reinsurance or Stop Loss insurance carrier is brought in. The Stop Loss is designed to limit the employer’s loss to a specified amount, to ensure that large, or unanticipated claims, do not upset the financial integrity of a self-funded health care plan.
A Third Party Administrator (TPA) administers the plan. Their responsibility includes maintaining eligibility, customer service, adjudicating and paying claims, preparing claim reports, plus arranging for managed care services such as network access and case management.
Everything that is provided in a conventionally fully insured plan is duplicated in a partial self funded health plan. With a self funded plan the employer holds the cash needed to fund benefits, and instead of sending the conventional fully insured premium to the insurance company, only a small fraction of the conventional premium is sent to the reinsurance carrier leaving more funds for claims.
The employer retains the funds when claims do not materialize.
