FREQUENTLY ASKED QUESTIONS ON SELF-FUNDED PLANS

What is a fully insured health plan?
What is a self-funded health plan?
Why do employers self fund their health plans?
With what laws must the self-funded plan comply?
Is self-funding for everybody?
What is excess-risk (or Stop-Loss) coverage?
Do I have to redesign my existing health plan?
What about payroll deductions?
Will my life insurance coverages be affected by self-funding my health plan?
Who will take the place of the insurance company to administer the plan?
What are the advantages in using a TPA?
Do TPAs do as good a job, or a better job, than insurance companies??
Why should I self-fund my health plan?

What is a fully insured health plan?

A fully insured health plan is one where the employer pays a premium to an insurance company for employee health coverage. The insurance premium is due in advance of the coverage and is actuarially projected to cover anticipated claim costs and the insurance company's overhead, commissions, reserves, various risk charges and taxes. In exchange for the premium, the insurance company assumes the risk of providing health coverage and performs various tasks such as the printing of employee booklets. Thirty years ago, all plans were fully insured and this type of funding was considered the norm. Today, however, the overwhelming majority of U.S. employers self-fund some portion of their health care plans.

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