A Self-Funded Plan essentially breaks a plan down into its 3 basic components: Administration, Claims, and Large Claim indemnity. An employer continues a current relationship with a provider (example Blue Cross) pays an administration fee, pays claims and purchases Stop-Loss Insurance for large claim protection. The Employer knows its upside potential savings as well as its downside risk from the outset.

Yes, an employer is responsible for all Medical and RX claims costs. However, each plan purchases Stop-Loss Insurance with a Specific Deductible (think of your Auto or Homeowners deductible) which sets the upside limit of the individual claims paid. This is true of both a large specific claim as well as an aggregate of all claims paid in a plan year. This Aggregate Stop-Loss policy caps the gross amount of claims to be paid by the employer. Each plan has its own stop-loss protection and the policy is tailored for that clients individual needs.

Savings are available in a few different ways. First you have what we term a “Claim-Run-off” which is savings derived by the fact that after you install the SFP in year #1, there will be a multi month time frame where your previous plan will pay the claims. This saves you approx. 15-20% of your annual costs. As the plan matures you will continue to see savings simply from the fact that the components are marketed competitively on an annual basis, the plan is not subject to all State Mandates, and unlike a fully insured plan the rate increases are primarily associated with the Stop-Loss coverage. Therefore if your fully insured plan receives a 10% rate increase on its total annual cost of $2million you are staring down a $200,000 real dollar cost increase. In a SFP your Stop-Loss may cost you $400,000 annually and you may get that same 10% rate increase-in this case you see a $40,000 real dollar cost. That said, in a good year you can get a “rate decrease” on your Stop-Loss-which is not unheard of-rate decreases on Fully Insured plans are few and far between.

Working together with your provider, our team of consultants and your internal HR team the transition is normally very smooth. In most cases the plan of benefits does not change-only the funding mechanism. It can be almost fully transparent to your employees. Normally 6-12 months of lead time is plenty of notice. With the necessary data a quote can be generated within a week.