A self-funded employee benefit plan is a benefit arrangement where the employer is responsible for the
risk and pays health claims instead of paying an insurance carrier a premium for a group policy.
Employers hire a Third Party Administrator (TPA) to set up the plan, adjudicate claims and otherwise
administer the plan.
Companies with the following attributes should explore self-funding their employee benefit plan:
Advantages of self-funded plans:
- Over 75 employees enrolled in coverage
- A growing or stable workforce
- Consistent cash flow
- Employer has control over the plan design
- Employers participate directly in the plan experience
- Improved Cash Flow: employers fund as claims are paid rather than prefunding a premium
- Reserves are held by the employer so they earn interest income on those dollars
- Lower cost of operation (administrative costs are usually lower)
- Carrier profit charges are eliminated
- State mandated benefits are eliminated, if desired
- State premium tax is avoided
Employees and dependents receive ID cards to present to their health care providers and pharmacies
and their coverage is just as easily recognized as a fully-insured plan from the carriers.
Stop loss coverage is a very important piece of a self-funded employee benefit plan. This coverage
provides protection for the employer against large claims over a predetermined threshold and can
include medical claims or medical and pharmacy claims.
As your TPA, Frates Benefit Administrators will arrange for stop loss coverage, a PPO network, a
pharmacy benefit manager for prescription drug processing and all other aspects of your self-funded
plan. We have the ability to do an in-depth analysis of your current plan and accurately forecast the
total cost of adopting a self-funded plan.