b'Associate News SELF FUNDINGGroup Health Benefits (Part 1 of 2)Note: I have used the terms plan and employerdents understand and utilize their benefits while somewhat interchangeably even though in theworking to protect the employers and the plans self-funded world they are legally quite different.they sponsor from high costs or unsustainable A self-funded plan is established and maintainedexpenses; andby an employer in accordance with the federal3. The Reinsurer - A contractual reinsurance agree-law known as the Employee Retirement Incomement is entered into between the employer and Security Act of 1974 (ERISA). The plan is thethe reinsurance carrier. This protects the plan legal entity under which employees and theirfrom large catastrophic claims related to one or dependents (i.e., plan participants) receive benefits.more individuals and from an unexpected quan-The employer that establishes the plan is the Plantity of smaller claims. Sponsor and by default the Plan Administrator as those terms are contemplated in ERISA.What Benefits Can Be SELF-FUNDED?How Does a Self-Funded Employers have a lot of flexibility in determining Health Benefits Program WORK? which benefits they will cover. The most common benefits that employers self-fund are medical, pre-While there is no one-size-fits-all template forscription drugs, dental and vision benefits. self-funding, a self-funded program is generally an arrangement whereby: Why Should a Company (1) the employer agrees to sponsor a plan and to assume the financial responsibility and risk for Self-Fund Employee BENEFITS? the payment of claims incurred by plan Favorable risk is financially rewarded. participants up to a predeterminedFederal law exempts the plan from burdensome stateagreed upon amount (e.g., $35,000 per participant during the contract year); regulation and onerous premium tax laws which(2) the sponsoring employer contracts with a alone costs the plan an additional 2-3% every year! third-party administrator (TPA) to provideThe employer controls cash flow, establishes re- administrative services and support, administer benefits, pay claims, provide customer service, serves, and manages risk through reinsurance. and to manage the program; andReduced operating expenses are retained by the (3) the sponsoring employer purchases stop loss employer. coverage from a licensed reinsurer to cap riskLower insurance company profit margin and riskexposure and to protect the plan from financial hardship. charge is passed along to the employer. Plan design flexibility and lower claim costs due There are Three Main Partners in a self-funded benefit program: to the elimination of many burdensome healthcare reform regulations and requirements. 1. The Plan Sponsor - The plan sponsor is the employer that adopts a plan that outlines theHow Does an Employercriteria for eligibility and the benefits provided.Self-Fund Employee BENEFITS? If you have questions The employer then safeguards employer and about this article or employee contributions to pay claims and other Most employers hire a TPA to set up the plan, pay eligible plan expenses; claims, field customer service calls, coordinatewould like to discuss enrollment, perform billing functions, and provideyour companys health 2. The Third-Party AdministratorA TPAnecessary banking and other support. insurance progam, feel provides administrative support and services tofree to contact me at the self-funded plan (e.g., enrollment, claims The employer works with the TPA to develop a plan(801) 263-8000 orprocessing, customer service, actuarial support,document and to determine eligibility criteria, ben- info@wmimutual.com. reporting, ID cards, EOBs, etc.). A TPA helpsefit design (e.g., deductibles, co-payments, coinsur-design and implement the plan document to theance), network criteria, various benefit limitations, sponsors specifications, enrolls members, paysand to implement cost controlling mechanisms.claims and helps employees and their depen-WPMA News / Summer 2022continued 41'