Commercially Self-Funded
Commercial self-funding is an alternative insurance strategy specifically catered to groups with a majority population of low healthcare utilizers. As an employer, you directly fund your employees’ medical claims costs but in cases where an employee/group of employees’ claims costs escalate beyond the allocated claims funds, stop loss coverage is paid for as protection.
Self-Funded Premium- Know the 4 Parts
- Administrative Fee- The amount paid for administration services such as Access to a Provider Network, Customer Service (Part of our work included), Claims and Plan Administrative Work, Banking.
- Stop Loss Coverage- Funds used to pay claims above customer liability claims. Basically, if your claims costs exceed your estimated liability, you buy additional insurance against that. This is known as Stop Loss Coverage or Stop Loss Insurance.
- Claims Run Out- Funding a reserve just in-case the plan terminates, and high claims costs incur beyond the termination date.
- Claims Funding- Covering expected medical claims throughout the year. If the amount paid in claims funding is HIGHER than the actual claims of the group, money is given back. If claims funding is LOWER than the actual claims of the group, Stop Loss Coverage kicks-in.
Advantages
- Not being subject to state mandates, i.e.- less regulation and underwriting protection which means lower premiums
- Monthly costs reflecting expected claims
- Opportunity to get money back if- actual claims are less than estimated claims costs per month
Disadvantages
- Strict Medical Underwriting
- Medical Claims Reports are required