b' Word Fall 2022 w w w. w m i m u t u a l . c o m ASSOCIATESELF NewsFUNDING By David Leo, Group Health President ofBenefitsWMI MutualInsurance Company . Deeper Dive & WMI TPAI we examined the Inasmuch as we dont have unlimited time to delve (Part 2 of 2)In part one of this series, nuts and bolts of self-funding group health benefitsinto any of these programs in great detail, we will and how employers can utilize these programs inbriefly explain the program and how it works. If you order to better control their health care spending. would like to discuss the specifics of these programs We reviewed what a self-funded program generallyand how they might work for your company, I invite looks like, the various components of the program,you to contact me.and different options employers can consider inI should note I have used the terms employer and an effort to reduce the amount of money allocatedplan somewhat interchangeably in this article to and spent on health care benefits. In this article,despite the fact that they are quite different in federal were going to look at a couple self-funding optionslaw and in the self-funding world. Strictly speaking, for employers of varying sizes and how they mightthe employer is the entity that establishes and funds comfortably implement a self-funded program withinthe self-funded plan, and the plan is the vehicle under their risk tolerance. which participants are covered and receive benefits. One myth we should dispel up front is that largerThis is not an insignificant distinction, but for pur-employer groups are healthier and less expensiveposes of this article, its unnecessarily technical.than smaller employer groups. While that may beI also use the term self-funding as opposed totrue (due in part to the more effective allocation ofself-insurance, but for purposes of this article, risk), it may not. It is important to understand thatthese terms can be interchanged.just because a large group may be more actuarilyTraditional Stop-Loss Insurancecredible or may spread risk more effectively than aPerhaps the simplest and most well-known self-fund-small group, it isnt necessarily healthier or cheapering program is a traditional stop-loss arrangement than the smaller group. In fact, in many instances,where the employer assumes direct responsibility for large employer groups are more expensive per capitaindividual participants claims (rather than an insur-than small employers because they have a greaterance company) and self-insures them up to a prede-concentration of expensive claims and a more influ- termined dollar amount (e.g., $50,000 per member). ential workforce that is in a stronger position to driveTo protect the employer from catastrophic risk, the a harder bargain and demand richer benefit plans withplan purchases reinsurance protection for amounts in fewer cost controls. excess of the plans retention. In addition to the indi-In order to attract smaller employers into the self- vidual member retention threshold (called specific funded market and to protect these plans from unac- deductible), the employer often purchases compa-ceptable or intolerable financial risk, many uniquenywide protection known as aggregate coverage to programs have cropped up over the years that blendprotect the company from an inordinate amount of to-fully-insured concepts with self-funded concepts. Intal claims spread amongst the group (e.g., $1 million this article, we will discuss several of those options.per contract year). In this scenario, the employers WPMA News / Fall 202241'