self-funding employee benefits: overview by jeanne nicholson of cbg benefits

EMPLOYEE BENEFITS | HR COMMUNICATIONS | PAYROLL AND HRIS

Jeanne NicholsonSr. Vice President, Benefit [email protected], ext. 230http://CBGBenefits.com

Employee Benefits

Considering the Options:Self-Funded Plans

CBG Benefits | Copyright 2014 | http://CBGBenefits.com

Why Should You Consider the Self-Funded Option?


You Should Consider Self-Funding, If:

You’d like to reduce your healthcare costs.



You need a better way to deal with PPACA’s impact

• Modified Community Rating Factors• Reinsurance Fee• Health Insurance Industry Fee



You want more control over your health plan.



You want to offer more customized Benefit Plan choices to employees.


The Momentum is Building

According to a 2013 Kaiser study:• Sixty-one percent of covered workers are in a self-

funded plan

• As a result of the Affordable Care Act, a growing number of firms plan to move to a self-funded option.

According to a 2013 Munich Health North America study:• 82 percent of health insurance executives

experienced a growing level of interest among employers in self-funding their group over the past 12 months

SELF-FUNDED PLANS:WHAT YOU NEED TO KNOW


Self-Funded: What Does it Mean?

Employer assumesa portionof the risk forhealth benefits.


Self-Funded: How is the Plan Administered?

• Options Include:

Administrative Services Only (ASO)

Third Party Administration (TPA)

Cigna, UHC, Aetna, Tufts, Blue Cross Blue Shield

BBA, Health Plans Inc.


Important Question: How does the self-funded

employer protect their organization?


Protection against Losses

Losses will occur: Severe accident, serious illness, etc.Here are two ways to protect your business:

Specific/Individual Stop Loss Aggregate Stop Loss

100% of covered losses you pay for any individual in excess of the individual policy year deductible will be reimbursed for the remainder of the policy year.

This is a precautionary umbrella insurance to protect the organization as a whole for losses that exceed 20%-25% above the expected claim liability.


Individual & Aggregate Stop Loss

The amount funded but not reimbursed ($25,000 in this example) will apply toward the Annual Stop Loss.

Example of how a $127,000 claim would be handled:

Employer pays the deductible amount: $25,000 If the individual

Stop Loss Deductible is $25,000…

…the Insurance Company pays the excess over the deductible amount: $102,000


Specific Stop Loss

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

$45,000

$50,000

Emplo

yee

1

Emplo

yee

2

Emplo

yee

3

Emplo

yee

4

Emplo

yee

5

Emplo

yee

6

Emplo

yee

7

Emplo

yee

8

Emplo

yee

9

Emplo

yee

10

Annu

al c

laim

Dol

lars

$30K Deductible –

Claims exceeding this level are covered at 100% by the stop loss carrier.


$-

$100,000.00

$200,000.00

$300,000.00

$400,000.00

$500,000.00

$600,000.00

$700,000.00

$800,000.00

$900,000.00

$1,000,000.00

Months

Claims

Janu

ary

Febr

uar y

Mar

ch

April

May

June

July

Augu

st

Sept

embe

r

Oct

ober

Nov

embe

r

Dec

embe

r

Aggregate Attachment Point

CarrierReimbursement

Employer Responsibility

Aggregate Stop Loss


Self-Funding: Advantages

• Flexibility in Plan Design• Enhanced Risk Management• Tax Savings• Retention• Additional Cash Flow• Margins - Eliminated


Self-Funding: Disadvantages

• Risk Assumption• Employer assumes risk between the normally anticipated claim level and

Aggregate Stop Loss Coverage level

• Fiduciary Responsibility • Employer is the named fiduciary of the plan


Final Question

Is Self-Funding the right option for your business?Contact me to find out:Jeanne NicholsonSr. Vice President, Benefit [email protected], ext. 230

self-funding employee benefits: overview by jeanne nicholson of cbg benefits

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