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HEALTH INSURANCE
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HMO
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DENTAL
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SELF FUNDING
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What is a preferred provider organization (PPO) plan, and how does it work?
A preferred provider organization (PPO) plan works for you in two ways: through a panel or network of physicians and other service providers (such as hospitals and labs), or through providers you select that are not in the network. Each time you or a covered family member needs care, you choose whether to see an in-network or an out-of-network provider.
Network providers are listed in your plan's provider directory. When you use an in-network provider, also called "going in-network," you generally receive a higher level of benefits. Also, fees from in-network providers tend to be lower, because the providers and the network have negotiated to have the providers accept certain fees for certain services.
Network providers are listed in your plan's provider directory. When you use an in-network provider, also called "going in-network," you generally receive a higher level of benefits. Also, fees from in-network providers tend to be lower, because the providers and the network have negotiated to have the providers accept certain fees for certain services.
With a PPO plan, do I name a primary care physician (PCP)?
The PPO plan does not require you to name a primary care physician (PCP) or coordinate your care through a particular doctor. However, you are free to choose a primary doctor, whether or not that doctor participates in the network. There are many new hybrid plans that require a PCP to be selected but permit access to specialty care without a referral.
What are the advantages of obtaining my care from in-network providers?
There are several advantages when you go in-network. Generally:
- You may not need to pay a deductible, or your deductible may be lower than it would be for out-of-network expenses.
- You don't need to submit claim forms and wait to be reimbursed by your plan.
- Your in-network provider obtains any needed preauthorization for you.
- You generally receive a higher level of benefits because participating providers (doctors, hospitals and other health care facilities) have agreed to provide their services at lower fees.
- Some plans provide preventive care services in-network that are not covered out-of-network.
- Some plans limit covered services out-of-network, but offer these services without a limit on the number of visits when the care is provided in-network.
How does the PPO plan work when I go out-of-network?
Generally, you may use any covered health care provider you choose. However, your cost will generally be higher and you have certain added responsibilities. For example:
- Each year, you must pay part of your eligible out-of-network expenses before the PPO plan begins to pay benefits. This amount is called the deductible.
- After you satisfy the deductible, the plan will reimburse you for a percentage of your eligible expenses and you will pay the balance. The percentage you pay is called your coinsurance percentage.
- You must get preauthorization for certain covered expenses such as a hospital stay. If you don't get the required preauthorization, the amount of benefits available will be reduced or the expenses will not be covered at all. This means your cost will be higher.
- You must complete claim forms and file claims with your health care company to receive payment of benefits. This is often overlooked but the covered individual must submit the claim to have the insurance company process and calculate benefits.
- The plan will not cover any benefit reductions due to failure to preauthorize certain treatments.
- The plan will not cover any charges above the allowable amount.
When do I need to file a claim form?
You may not need to file a claim form when you see in-network providers. Always make every effort to make sure your claim was filed. Do not ignore notices and unpaid claim notices. Call your provides, agent and insurance carrier if the claim was not paid.
When you do need to file a claim form, as you need to do in most cases when you go out-of-network, your doctor may handle your expense in one of two ways. Most doctors require you to pay the bill right away. In this case, get a receipt and file it with a claim form to be reimbursed. If the expense is covered, you will be reimbursed for part of the bill. To file a claim, follow the instructions on the claim form. If you have more than one health insurance plan and have received an Explanation of Benefits (EOB) form from another health care plan, be sure to include a copy with your claim.
Sometimes doctors are willing to wait for payment. In this case, you or your doctor will file the receipt and completed claim form with your health care company. The health care company will pay the doctor for the part of your expense the plan will cover. The doctor will then bill you for the part the plan did not pay.
When you do need to file a claim form, as you need to do in most cases when you go out-of-network, your doctor may handle your expense in one of two ways. Most doctors require you to pay the bill right away. In this case, get a receipt and file it with a claim form to be reimbursed. If the expense is covered, you will be reimbursed for part of the bill. To file a claim, follow the instructions on the claim form. If you have more than one health insurance plan and have received an Explanation of Benefits (EOB) form from another health care plan, be sure to include a copy with your claim.
Sometimes doctors are willing to wait for payment. In this case, you or your doctor will file the receipt and completed claim form with your health care company. The health care company will pay the doctor for the part of your expense the plan will cover. The doctor will then bill you for the part the plan did not pay.
What happens if I need specialty care that is not available from in-network providers where I live?
You may be referred to an out-of-network provider if you need specialized care that your health care company determines to be medically necessary and that is not available through an in-network provider in your area. As long as you use the provider you're referred to by your health care company and follow your plans rules, you'll be covered for that care at in-network benefit levels.
What happens in an emergency?
In a true emergency, get the care you need as quickly as you can. Contact member services for your health care company at the number on your ID card, as soon as you are able. Do not rely on the hospital or emergency room. Follow up care after an emergency must be coordinated with your insurance carrier.
What happens if I need care while I'm traveling?
If it's not an emergency and you need care while traveling, call member services for your health care company at the number on your ID card. Member services can refer you to an in-network provider.
In a true emergency, get the care you need as quickly as you can. If you are able, contact member services even in an emergency, and your health care company can help you decide where to go for care. However, even if you are unable to contact member services, get the care you need.
Check to see how your plan defines a true emergency. Examples typically include severe bleeding, chest pain, and unconsciousness. Also check to see how soon after the onset of the emergency you must notify your health care company.
In a true emergency, get the care you need as quickly as you can. If you are able, contact member services even in an emergency, and your health care company can help you decide where to go for care. However, even if you are unable to contact member services, get the care you need.
Check to see how your plan defines a true emergency. Examples typically include severe bleeding, chest pain, and unconsciousness. Also check to see how soon after the onset of the emergency you must notify your health care company.
What is a deductible?
A deductible is the part of eligible expenses you must pay before the plan begins to pay a percentage of your eligible expenses.
Are there expenses that don't count toward my deductible?
Yes. Some of your expenses will not count toward your deductible. For example, any penalty you may pay because you failed to preauthorize treatment through your health care company will not count. For out-of-network care, amounts your care provider charges above the plans allowable amount for a given service also will not count toward your deductible.
What is coinsurance?
After you satisfy the deductible, the plan will reimburse you for a percentage of your eligible expenses for out-of-network care and you will pay the balance. The percentage you pay is called your coinsurance percentage.
What is a co-payment?
A co-payment generally applies to in-network care. When you stay in-network, you pay only a fixed amount at the time you receive services. That amount is called your co-payment.
What is preauthorization?
Preauthorization is the process by which a health care company or preauthorization company reviews the proposed treatment and tells you and your doctor how benefits may be paid. If you receive care out-of-network, you must obtain preauthorization for certain covered expenses such as a hospital stay. Some plans also require preauthorization for certain in-network services. If you don't get the required preauthorization, your cost will be higher because the benefits payable by the plan will be reduced or the expenses will not be covered at all.
What's the amount known as the "allowable amount," the "U&C amount" or the "R&C amount"?
The terms "allowable amount," "U&C amount" or "R&C amount" vary by plan. This amount is determined by your health care plan. If your doctor charges you more than this amount, you will not only be responsible for your deductible and coinsurance, but also for the entire difference between the U&C amount and the amount your provider charged. This concept only applies to out-of-network care, because in-network providers have agreed to negotiated fees that are by definition allowable amounts.
What are covered services?
Covered services are services covered by the plan. No medical plan covers everything. If you obtain services that are not covered services, you pay the full cost for those services.
What is an out-of-pocket maximum?
An out-of-pocket maximum is the most you would have to pay out of your own pocket for eligible expenses. Not all plans have an out-of-pocket maximum. Check your Benefits Summary for details. With a plan that has an out-of-pocket maximum, once you reach the out-of-pocket maximum for a given year, the plan would pay all eligible expenses for covered services until any lifetime maximum benefit is reached.
Not all expenses count toward an out-of-pocket maximum. Expenses for services that are not covered under the plan, amounts over any allowable amount limit, and penalties for not preauthorizing care when needed would not count toward your out-of-pocket maximum.
Not all expenses count toward an out-of-pocket maximum. Expenses for services that are not covered under the plan, amounts over any allowable amount limit, and penalties for not preauthorizing care when needed would not count toward your out-of-pocket maximum.
What is a lifetime maximum?
Under the current law, lifetime limits on most benefits are prohibited in any health plan or insurance policy. Previously, many plans set a lifetime limit — a dollar limit on what they would spend for your covered benefits during the entire time you were enrolled in that plan.
What is a Health Maintenance Organization (HMO) and how does it work?
A Health Maintenance Organization (HMO) provides health care services to enrolled members through a panel of HMO providers. When you enroll in an HMO, you select a participating PCP for each enrolled family member. You may select any participating PCP from your HMO's provider directory. Your PCP coordinates your medical care, either by providing that care or by issuing a referral to another provider. With an HMO plan, you generally pay a fixed amount each time you receive care. Coinsurance typically does not apply with an HMO.
Except in an emergency as defined by the plan, or with previous approval through the plan's authorization procedures, only services provided by or referred by your PCP will be covered under an HMO.
Except in an emergency as defined by the plan, or with previous approval through the plan's authorization procedures, only services provided by or referred by your PCP will be covered under an HMO.
What is a primary care physician (PCP)?
With some HMOs, you are asked to select a primary care physician (PCP) to be the personal doctor for each enrolled family member. If you are asked to select a PCP, you may select any participating PCP from your HMO's provider directory.
What are the advantages of an HMO plan?
There are several advantages when you belong to an HMO. Generally:
- You don't need to submit claim forms and wait to be reimbursed by your plan.
- Your HMO provider obtains any needed precertification for you.
- In most cases, you only pay a copayment (fixed dollar amount) at the time you receive covered services. After you pay your copayment, you owe no more payments for the covered services.
- HMO plans typically cover certain preventive care services.
How does an HMO work when I obtain care outside the HMO?
Generally, HMO plans do not cover services provided outside the HMO except in certain emergency situations.
My plan requires me to select a PCP when I enroll. How do I do so?
When you enroll, you may select any PCP (primary care physician) from your HMO's network provider directory for each covered family member. Your enrollment materials will request your PCP's name, or a code for that PCP from the network provider directory. You will generally find PCPs in the areas of family practice, general practice, internal medicine, or pediatrics. Some plans allow a woman to name one PCP for her primary care and a second specialist in Obstetrics and Gynecology for services such as pelvic exams and Pap smears.
It's a good idea to check with your HMO before you select a PCP. Some PCPs have "full" practices and cannot accept new patients, and others may no longer be participating in the network.
It's a good idea to check with your HMO before you select a PCP. Some PCPs have "full" practices and cannot accept new patients, and others may no longer be participating in the network.
Can I change my PCP?
Yes. You or a covered family member may change PCPs for any reason. Just call the member services number on your ID card.
Do I ever need to file a claim form with an HMO?
You generally don't need to file a claim form when you see your PCP. Just show your ID card when you receive services so the office knows to charge you a co-payment and bill your HMO plan for the balance. The plan works the same way when your PCP refers you to another HMO doctor or hospital for care. Just show your ID card and pay your co-payment.
In a true emergency, your eligible expenses may be covered even if you had to go outside the HMO as long as you follow the HMO plan's rules. In this case, the provider will bill you directly. You then need to submit a claim form to be reimbursed. You will be reimbursed for part of the bill.
To file a claim, follow the instructions on the claim form. If you received an Explanation of Benefits (EOB) statement from another health care company, be sure to include a copy with your claim form.
In a true emergency, your eligible expenses may be covered even if you had to go outside the HMO as long as you follow the HMO plan's rules. In this case, the provider will bill you directly. You then need to submit a claim form to be reimbursed. You will be reimbursed for part of the bill.
To file a claim, follow the instructions on the claim form. If you received an Explanation of Benefits (EOB) statement from another health care company, be sure to include a copy with your claim form.
What happens if I need specialty care that is not available from my HMO?
You may be referred to a non-HMO provider if you need specialized care that your HMO determines to be medically necessary and the care is not available through the HMO in your area. As long as you use the provider you're referred to by your HMO and follow your HMOs rules, you'll be covered for that care.
What happens in an emergency?
In a true emergency, get the care you need as quickly as you can. Assuming you are able, try to contact your HMO, even in an emergency. However, even if you are unable to contact your HMO, get the care you need. Even if you need to seek care from a non-HMO provider, your plan will cover emergency care as long as you follow the plan rules.
Check to see how your plan defines a true emergency. Examples typically include severe bleeding, chest pain and unconsciousness. Also check to see how soon after the onset of the emergency you must notify your HMO in order to be covered.
Check to see how your plan defines a true emergency. Examples typically include severe bleeding, chest pain and unconsciousness. Also check to see how soon after the onset of the emergency you must notify your HMO in order to be covered.
What happens if I need care while I'm traveling?
If it's not an emergency and you need care while traveling, call your HMO and your HMO can help you arrange a referral.
In a true emergency, get the care you need as quickly as you can. If you are able, contact your HMO, even in an emergency. However, even if you are unable to contact your HMO, get the care you need. Even if you need to seek care from a non-HMO provider, your plan will cover emergency care as long as you follow the plan rules.
Check to see how your plan defines a true emergency. Examples typically include severe bleeding, chest pain and unconsciousness. Also check to see how soon after the onset of the emergency you must notify your HMO in order to be covered.
In a true emergency, get the care you need as quickly as you can. If you are able, contact your HMO, even in an emergency. However, even if you are unable to contact your HMO, get the care you need. Even if you need to seek care from a non-HMO provider, your plan will cover emergency care as long as you follow the plan rules.
Check to see how your plan defines a true emergency. Examples typically include severe bleeding, chest pain and unconsciousness. Also check to see how soon after the onset of the emergency you must notify your HMO in order to be covered.
Do I pay a deductible?
A deductible is the part of your eligible expenses you pay each year before the plan begins to pay benefits. Check your Benefits Summary for details.
Do I pay coinsurance?
Coinsurance is the percentage of eligible expenses you pay after you meet any deductible required by your plan. Check your Benefits Summary for details.
What is a copayment?
A copayment is a fixed amount you pay at the time you receive services.
What is preauthorization?
Preauthorization is the process by which an HMO reviews the proposed treatment and tells you and your doctor how benefits may be paid. Generally, preauthorized care is paid at the highest level of coverage.
You must obtain preauthorization for certain covered expenses such as a hospital stay. If you don't get the required preauthorization, your cost will be higher because the benefits payable by the plan will be reduced or the expenses will not be covered at all.
You must obtain preauthorization for certain covered expenses such as a hospital stay. If you don't get the required preauthorization, your cost will be higher because the benefits payable by the plan will be reduced or the expenses will not be covered at all.
What are covered services?
Covered services are services covered by the plan. No medical plan covers everything. If you obtain services that are not covered services, you pay the full cost for those services.
What is an out-of-pocket maximum?
An out-of-pocket maximum is the most you would have to pay out of your own pocket for eligible expenses. Most HMOs do not have an out-of-pocket maximum. Check your Benefits Summary for details. With a plan that has an out-of-pocket maximum, once you reach the out-of-pocket maximum for a given year, the plan would pay all eligible expenses for covered services until any lifetime maximum benefit is reached.
Not all expenses count toward an out-of-pocket maximum. Expenses for services that are not covered under the plan, amounts over any allowable amount limit, and penalties for not preauthorizing care when needed would not count toward your out-of-pocket maximum.
Not all expenses count toward an out-of-pocket maximum. Expenses for services that are not covered under the plan, amounts over any allowable amount limit, and penalties for not preauthorizing care when needed would not count toward your out-of-pocket maximum.
What is a lifetime maximum?
A lifetime maximum is the most that will be paid by the plan for covered services for a given plan member. Not all plans apply a lifetime maximum, and some plans have different lifetime maximums for different services. Once you reach the lifetime maximum, you pay all expenses over that amount.
What is a dental preferred provider organization (dental PPO) plan, and how does it work?
A dental preferred provider organization (dental PPO) plan works for you in two ways: through a panel or network of participating dentists, or through dentists you select that are not in the network. Each time you or a covered family member needs dental care, you choose whether to see an in-network or an out-of-network dentist.
In-network dentists are listed in your plan's provider directory. When you use an in-network dentist, also called obtaining dental services in-network, your costs tend to be lower, because the dentists and the network have negotiated to have the dentists accept certain fees for certain services.
In-network dentists are listed in your plan's provider directory. When you use an in-network dentist, also called obtaining dental services in-network, your costs tend to be lower, because the dentists and the network have negotiated to have the dentists accept certain fees for certain services.
With a dental PPO plan, do I name a primary dentist?
The dental PPO plan does not require you to name a primary care dentist or coordinate your care through a particular dentist. However, you are free to choose a primary dentist, whether or not that dentist participates in the network.
What are the advantages of obtaining my care from in-network dentists?
There are several advantages when you go in-network. Generally:
- You don't need to pay a deductible, or your deductible is lower than when you go out-of-network.
- You don't need to submit claim forms and wait to be reimbursed by your plan.
- With some plans, you pay a smaller percentage of coinsurance when you go in-network.
- With other plans, you only pay a copayment (fixed dollar amount) at the time you receive covered services. With these plans, after you pay your copayment, you owe no more payments for the covered services.
How does the dental PPO plan work when I go out-of-network?
Generally, you may use any covered dentist you choose. However, your cost will generally be higher and you have certain added responsibilities. For example:
- Each year, you must pay part of your eligible out-of-network expenses before the plan begins to pay benefits. This amount is called the deductible.
- After you satisfy the deductible, the plan will reimburse you for a percentage of your eligible expenses and you will pay the balance. The percentage you pay is called your coinsurance percentage, and may be higher than for in-network services.
- You must complete claim forms and file claims with the dental plan to receive payment of benefits.
- The plan will not cover any charges above the allowable amount.
When do I need to file a claim form?
You may not need to file a claim form when you see in-network providers.
When you do need to file a claim form, as you need to do in most cases when you go out-of-network, your dentist may handle your expense in one of two ways. Most dentists require you to pay the bill right away. In this case, get a receipt and file it with a claim form to be reimbursed. If the expense is covered, you will be reimbursed for part of the bill. To file a claim, follow the instructions on the claim form. If you have more than one health or dental insurance plan and have received an Explanation of Benefits (EOB) form from another plan, be sure to include a copy with your claim.
Sometimes dentists are willing to wait for payment. In this case, you or your dentist will file the receipt and completed claim form with your dental health care company. The dental health care company will pay the dentist for the part of your expense the plan will cover. The dentist will then bill you for the part the plan did not pay.
When you do need to file a claim form, as you need to do in most cases when you go out-of-network, your dentist may handle your expense in one of two ways. Most dentists require you to pay the bill right away. In this case, get a receipt and file it with a claim form to be reimbursed. If the expense is covered, you will be reimbursed for part of the bill. To file a claim, follow the instructions on the claim form. If you have more than one health or dental insurance plan and have received an Explanation of Benefits (EOB) form from another plan, be sure to include a copy with your claim.
Sometimes dentists are willing to wait for payment. In this case, you or your dentist will file the receipt and completed claim form with your dental health care company. The dental health care company will pay the dentist for the part of your expense the plan will cover. The dentist will then bill you for the part the plan did not pay.
What happens if I need dental care while I'm traveling?
If you need dental care while traveling, call member services for your dental plan at the number on your ID card. Member services can refer you to an in-network dentist.
In a dental emergency such as an accident in which you lose teeth or extreme dental pain, contact member services if you are able and the dental plan can help you decide where to go for care. However, even if you are unable to contact member services, get the care you need. Even if you need to go out-of-network, your plan may cover emergency care at in-network benefit levels as long as you follow the plan rules.
In a dental emergency such as an accident in which you lose teeth or extreme dental pain, contact member services if you are able and the dental plan can help you decide where to go for care. However, even if you are unable to contact member services, get the care you need. Even if you need to go out-of-network, your plan may cover emergency care at in-network benefit levels as long as you follow the plan rules.
What is a deductible?
A deductible may only apply, or may be higher, when you obtain care out-of-network. A deductible is the part of eligible expenses you must pay before the plan begins to pay a percentage of your eligible expenses.
Are there expenses that don't count toward my deductible?
Yes. Some of your expenses will not count toward your deductible. For example, amounts your dentist charges above the plans allowable amount for a given service will not count toward your deductible.
What is coinsurance?
Coinsurance may only apply to out-of-network care. After you satisfy the deductible, the plan will reimburse you for a percentage of your eligible expenses for out-of-network care and you will pay the balance. The percentage you pay is called your coinsurance percentage.
What is a copayment?
If your plan has copayments, the copayment generally applies to in-network care. With this type of plan, when you obtain care from an in-network provider, you pay only a fixed amount at the time you receive services. That amount is called your copayment.
What is predetermination of benefits?
Predetermination of benefits is the process by which a dental care company reviews the proposed treatment and tells you and your dentist how benefits may be paid.
It's a good idea to obtain a predetermination of benefits before expensive services are performed. Have your dentist complete a form showing the proposed treatment and submit it to your dental care company. The dental care company will send your dentist an explanation of what benefits would be covered and what you would have to pay out of your pocket. You can then discuss your treatment options with your dentist.
It's a good idea to obtain a predetermination of benefits before expensive services are performed. Have your dentist complete a form showing the proposed treatment and submit it to your dental care company. The dental care company will send your dentist an explanation of what benefits would be covered and what you would have to pay out of your pocket. You can then discuss your treatment options with your dentist.
What's the amount known as the "allowable amount," the "U&C amount" or the "R&C amount"?
The terms "allowable amount," "U&C amount" or "R&C amount" vary by plan but refer to the same thing. The allowable, usual and customary or reasonable and customary amount is the amount usually charged for a given service by most providers in your area. This amount is determined by your dental care plan. If your dentist charges you more than this amount, you will not only be responsible for your deductible and coinsurance, but also for the entire difference between the U&C amount and the amount your provider charged. This concept only applies for out-of-network care, because PPO dentists have agreed to accept negotiated fees, which are by definition allowable amounts.
For example, suppose you receive a service for which the "U&C amount" is $100 but your dentist charges you $110. The dental care company will multiply the percentage the plan pays for that service by $100. So even if the service were covered at 100%, you would pay the $10 difference ($110 charge minus $100 U&C).
For example, suppose you receive a service for which the "U&C amount" is $100 but your dentist charges you $110. The dental care company will multiply the percentage the plan pays for that service by $100. So even if the service were covered at 100%, you would pay the $10 difference ($110 charge minus $100 U&C).
What are covered services?
Covered services are services covered by the plan. No dental plan covers everything. If you obtain services that are not covered services, you pay the full cost for those services.
What is an out-of-pocket maximum?
An out-of-pocket maximum is the most you would have to pay out of your own pocket for eligible expenses. Not all plans have an out-of-pocket maximum. Check your Benefits Summary for details. With a plan that has an out-of-pocket maximum, once you reach the out-of-pocket maximum for a given year, the plan would pay all eligible expenses for covered services until any lifetime maximum benefit is reached.
Not all expenses count toward an out-of-pocket maximum. Expenses for services that are not covered under the plan and amounts over any allowable amount limit would not count toward your out-of-pocket maximum.
Not all expenses count toward an out-of-pocket maximum. Expenses for services that are not covered under the plan and amounts over any allowable amount limit would not count toward your out-of-pocket maximum.
What is a lifetime maximum?
A lifetime maximum is the most that will be paid by the plan for covered services for a given plan member. Not all plans apply a lifetime maximum, and some plans have different lifetime maximums for different services or for in-network and out-of-network services. Once you reach the lifetime maximum, you pay all expenses over that amount.
Why should I self-fund my health plan?
- Employers have complete flexibility in customizing the health plan to meet their cost saving requirements and their employees' needs.
- Excess-risk coverage is available to minimize the employers risk.
- The plan is governed by federal legislation, and avoids most state mandated benefits ie. mental health.
- Avoid state insurance premium taxes, thus again, lowering costs.
- The employer's cost for the benefit plan is totally dictated by their claim experience, rather than the experience of a pool or insurance carrier's book of business.
- Self-funded plans pay claims as they occur
What are the disadvantages of self-funding?
- Self-funded plans pose a much greater risk for small employers (fewer than 250 employees) because of the high cost of reinsurance for high risk claims.
- Self-funded plans may exact a heavy toll in highly specialized administrative functions.
- Self-funding exposes you to serious risk of catastrophic individual claims or unexpectedly high aggregate claims.
How does self-funded plans work?
The employer opens a bank account that the insurer uses to pay claims. Each time a claim is paid the employer funds the account for the amount of the payment. Generally a company will bank a percentage of money per employee based on the amount they historically have paid out in monthly claims. They also normally add a little extra to pay for reinsurance, a policy that covers the company against catastrophic claims. If actual claims exceed the protected amount, the insurer pays for this excess.
During the first year of self-funding, an employer usually pays for only nine to ten months of claims. This improved cash flow can be used to the employer's advantage. Another advantage is that an employer only pays benefits based on his employees' histories, not someone else's employees. Companies can either manage their own plans internally, or hire a third party administrator to do it for them.
During the first year of self-funding, an employer usually pays for only nine to ten months of claims. This improved cash flow can be used to the employer's advantage. Another advantage is that an employer only pays benefits based on his employees' histories, not someone else's employees. Companies can either manage their own plans internally, or hire a third party administrator to do it for them.
Where do my premium dollars go?
Under self-funded plans, roughly 75 percent of an employer's premium goes toward paying claims and the remaining amount goes toward administering the plan and profits. In contrast, employers that have fully-funded plans see only 70 percent of their dollars go toward benefits, while the remaining 30 percent is claimed by the insurance company for administrative costs and profit.
Do I have to redesign my existing health plan?
No, not at all. Self-funding does not require a change in the existing group coverages you offer your employees.
What is stop-loss-risk coverage?
Stop-loss-risk coverage protects the employer against unforeseen catastrophic claims that would place undue financial burdens on the employer. There are two types of coverage:
Specific stop-loss: Places a cap on your liability for any single claim. This type of coverage insures against a single catastrophic claim that exceeds a dollar limit chosen by the employer and agreed to by the excess-risk carrier.
For example, specific coverage would come into play if one of the covered participants was in a catastrophic accident and had claims that exceeded the agreed upon dollar limit. In this case, the specific coverage would reimburse the employer for the covered expenses beyond that dollar limit.
Aggregate stop-loss: Sets a limit to your total monthly or annual exposure for all claims. Aggregate coverage insures against all the claims exceeding a specific dollar limit chosen by the employer and agreed to by the excess-risk carrier. If all the claims payable exceed the agreed upon dollar limit, aggregate coverage would reimburse the employer for the excess.
Specific stop-loss: Places a cap on your liability for any single claim. This type of coverage insures against a single catastrophic claim that exceeds a dollar limit chosen by the employer and agreed to by the excess-risk carrier.
For example, specific coverage would come into play if one of the covered participants was in a catastrophic accident and had claims that exceeded the agreed upon dollar limit. In this case, the specific coverage would reimburse the employer for the covered expenses beyond that dollar limit.
Aggregate stop-loss: Sets a limit to your total monthly or annual exposure for all claims. Aggregate coverage insures against all the claims exceeding a specific dollar limit chosen by the employer and agreed to by the excess-risk carrier. If all the claims payable exceed the agreed upon dollar limit, aggregate coverage would reimburse the employer for the excess.
How do payroll deductions work?
Any payments made by employees for their coverage or coverage for their dependents are still handled through the employer's payroll department. However, instead of being sent to the insurance company as premiums, they are held by the employer until such time as claims become due and payable.
What is a 12/12 contract?
A 12/12 contract is a contract that states claims have to be incurred and paid within twelve months.
What is a 12/15 contract?
A 12/15 contract is a contract that states claims had to be incurred within twelve months, but paid within fifteen months.
To what laws must a self-funded plan comply?
The self-funded plan comes under all relevant federal laws:
Employee retirement Income Security Act (ERISA), Consolidated Omnibus Budget Reconciliation Act (COBRA), the Americans with Disabilities Act (ADA), the Pregnancy Discrimination Act, the Age Discrimination in Employment Act, the Civil Rights Act, and various budget reconciliation acts such as Tax Equity and Fiscal Responsibility Act (TEFRA), Deficit Reduction Act (DEFRA), and Economic Recovery Tax Act (ERTA).
Employee retirement Income Security Act (ERISA), Consolidated Omnibus Budget Reconciliation Act (COBRA), the Americans with Disabilities Act (ADA), the Pregnancy Discrimination Act, the Age Discrimination in Employment Act, the Civil Rights Act, and various budget reconciliation acts such as Tax Equity and Fiscal Responsibility Act (TEFRA), Deficit Reduction Act (DEFRA), and Economic Recovery Tax Act (ERTA).
Will my life insurance coverages be affected by self-funding my health plan?
No. Your life insurance and other benefit plans are completely separate from your health plan. Your life insurance coverages will not be affected.
Who will take the place of the insurance company to administer the plan?
A self-funded employer can either administer the plan himself, convert his present "insured" arrangement to an Administrative Services Only (ASO) arrangement with his present insurance company, or have an independent Third-Party Administrator (TPA) administer the plan.
What is a TPA?
A TPA (Third Party Administrator) is a company that specializes in administering self-funded plans.
What is an ASO?
Administrative Services Only (ASO) arrangements are with the present insurance company. The insurance carrier administers the plan for the employer.
What are the advantages in using a TPA as opposed to an ASO arrangement with an insurance company?
The only business of a TPA is the administration of benefit plans, not insuring groups. Insurance companies offer both arrangements. Insurers who offer ASO contracts may or may not provide the level of flexibility desired. Both should be considered however. Check price, service, staff, etc.
What services are offered by a TPA or an ASO?
- Plan Design consulting
- Cafeteria Plan Design
- Contracting for excess-risk coverage
- Claims Administration
- Contracting with utilization review/managed care companies
- Assistance in completing government forms - 5500 series
- Assistance in writing and printing of SPD booklets an plan documents for counsel review/approval
- Employee communication programs
- COBRA compliance assistance
- Client reports
- Record keeping
