Self-funded health coverage can give you and your employees added protection against growing health care costs, especially in light of the Affordable Care Act (ACA).
Unlike the traditional health benefits plan model, costs are controlled by the employer – not an insurance company. Employers set the level of benefits they wish to offer and the cost for employers each year.
Costs of self-funded plans are similar to an insurance premium and include administration fees and all medial claims costs, as well as stop-loss premium payments. Stop-loss insurance limits a company’s exposure on medical costs to a set level.
Employees are charged a set monthly fee, established by the employer sponsoring the health plan benefits. The employer pays the medical claims costs incurred by the covered persons enrolled in the plan. These costs are different each month, depending on the cost of care paid for covered persons. If claims costs exceed the catastrophic claims level established for the policy, then stop-loss insurance reimbursements are made to the employer.
If medical costs do not reach the annual amount budgeted, then the employer can collect a refund on the unused medical costs. Historically, about half of companies obtain refunds.