Self Fund (partially) Health Insurance

ktherman2003 · May 2004

My question is has anybody thought about partially self funding their health insurance. Whereas, the company would purchase a $2,000 deductible, but the employees would still have their $500 deductible. The company would pay after the employee met their $500 deductible up until the $2,000 then the insurance company would take over. Has anyone done this sort of administration and what are your thoughts.

Thanks!!!

Mentel · May 2004

We just changed carriers to get away from this. For the last four years, we had a $10,000 specific stop loss per person, $20,000 per family. The carrier wanted us to go to a much higher specific like $25,000 per person. Our owners were not comfortable with this risk. We found a fully-insured plan with comparable rates to the new $25,000 specific stop loss, so we are now back with fully-insured. The pros to fully-insured is that you know each month what insurance costs the company. The pros to partially self-funded are some savings in premium but this comes with some risk. A $2000 specific stop loss is not very high so you have minimized the risk. Good luck on your new policy. I am very surprised you found a carrier that would do a $2000 specific stop loss. That is very, very low!

NaeNae55 · May 2004

If I understand you right, you are thinking of buying a fully insured policy for your employees with a $2,000 deductible. Then you want to do a self-funded plan for the top $1,500 of that deductible. Right?

When I worked for a TPA we had a client who did this. All claims had to go to the fully insured company first, and then came to us for processing. It really held up the payment. We also ran into problems if the insurance company paid incorrectly. Twice we paid the employee in error because the insurance company made a mistake. The insurance company had means to get it back since they paid the providers directly. We were to pay the employees directly, and had no way to get refunds. (Our requests for refunds were ignored and the client didn't want to pursue it due to all the difficulties involved.)

I also understand our client had a really difficult time finding someone to administer this. (We refused to do it a 2nd year.) I think if the company who is handling your fully insured business is willing to do this, it might work. But don't be surprised by high TPA fees.

I think ultimately our client decided it was way more trouble than it was worth.

Good luck!

Sue · May 2004

We are in our second year with this type of policy. The single deductible is $1,000 for in-network hospital/surgical, lab/xray. We are fully insured through United Healthcare. It lower our 2003 increase from 62% to 27%!!

The employee pays the first $250, the company pays the next $750. The plan works great. It is administered through our section 125 flex plan. The flex administrators process the paperwork.

In the first year only 11% of the funds were used. And - most importantly - employees became more aware of their health costs and EOBs. Our last renewal was only 11 percent.

Good luck

J Mack · May 2004

SUE...

How does your accounting/payroll group treat the $750 of deductible your company pays?

JMack

ktherman2003 · May 2004

Well, we haven't gotten that far yet. This is just in the "thinking" process. For the 2005 plan year, we are hoping to keep the rates the same, we will purchase a $2,000 deductible with the insurance carrier. Say the actual premium is $200 per person. However, we still charge the $400 as we have done in the past for the $500 ded. That $200 will go into a pool to pay those claims that are incurred after the employee meets the $500 deductible up until the $2,000 deductible is met and then the insurance company will take over. We would be doing the administration of the self funding in house.

lnelson · May 2004

Just an observation-
By doing it this way you must make sure to comply with HIPAA. I am under the assumption you will be privvy to medical information in order to pay the remaining deductible. If you haven't already done this you will need authorization from all ee's participating in your health benefits.

Sue · May 2004

It is paid through a section 125 plan, so it does not effect payroll. The check is sent from the Flex administrator.

Self Fund (partially) Health Insurance

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