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Self Funding

A self-funded employee benefit plan is a benefit arrangement where the employer is responsible for the risk and pays health claims instead of paying an insurance carrier a premium for a group policy. Employers hire a Third Party Administrator (TPA) to set up the plan, adjudicate claims and otherwise administer the plan.

Companies with the following attributes should explore self-funding their employee benefit plan:

• Over 75 employees enrolled in coverage
• A growing or stable workforce
• Consistent cash flow

Advantages of self-funded plans:

• Employer has control over the plan design
• Employers participate directly in the plan experience
• Improved Cash Flow: employers fund as claims are paid rather than prefunding a premium
• Reserves are held by the employer so they earn interest income on those dollars
• Lower cost of operation (administrative costs are usually lower)
• Carrier profit charges are eliminated
• State mandated benefits are eliminated, if desired
• State premium tax is avoided

Employees and dependents receive ID cards to present to their health care providers and pharmacies and their coverage is just as easily recognized as a fully-insured plan from the carriers.

Stop loss coverage is a very important piece of a self-funded employee benefit plan. This coverage provides protection for the employer against large claims over a predetermined threshold and can include medical claims or medical and pharmacy claims.

As your TPA, Frates Benefit Administrators will arrange for stop loss coverage, a PPO network, a pharmacy benefit manager for prescription drug processing and all other aspects of your self-funded plan. We have the ability to do an in-depth analysis of your current plan and accurately forecast the total cost of adopting a self-funded plan.