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Frequently Asked Questions

Here are questions commonly asked by corporate managers about the advantages of self-insurance: 

Why consider self-insurance? 

With the increasingly greater demands being placed on corporate resources, financial decision-makers are taking longer and more critical looks at all major expense items. Among these, and one of the largest common to all businesses, is the cost of health care insurance. 

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What coverages can be funded by self-insurance? 

Any benefit can be self-insured if a predictable loss level can be determined. The most common self-insured coverages are short-term disability, medical care, dental benefits, vision care and drug cards. 

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What is the minimum size for a group considering self-insurance? 

The size requirement varies with the type of coverage sought and the limits of liability desired. A smaller group with a history of stable claims experience and good financial stability may adapt more readily to a self-insured program than a larger group with erratic financial conditions or fluctuating claims losses. 

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How does stop-loss work in relation to self-insurance? 

Stop-loss does just what its name implies - stops losses at a predetermined level. An employer who elects to self-insure an employee benefit program wants to assume the risk only for as much as the firm could tolerate without excessive financial drain. The balance of risk is placed under a stop-loss, or reinsurance, policy to insure only against the unknown. 

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What types of stop-loss coverage are available? 

There are two types of stop-loss arrangements - aggregate and specific. Aggregate stop-loss limits the liability of a total group against losses above predictable levels, and specific limits liability on any one disability above a given level. 

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How much does a stop-loss policy cost? 

Generally, premiums are related to the degree of risk assumed by the employer. The greater the risk, the less the premium. How much will I save with self-insurance? Savings will depend upon a number of variables. However, you usually can expect to save from 25% to 40% of your insured costs, plus have increased cash flow efficiency and use of reserves. Elimination of premium tax alone often results in savings of as much as 3% of the actual retention for many large groups. 

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How important is a third-party buffer against disgruntled employees? 

If a self-insured program is established and operated properly, there is little reason to anticipate serious problems with disgruntled employees. A program established on a reasonable, easily understood basis will eliminate most problems before they start, since often employee dissatisfaction arises due to poor benefit communications. In other words, the disgruntled employee often simply does not understand what benefits are being provided and how the plan works. 

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What effect did the enactment of ERISA have on self-insurance programs? 

ERISA specifies that no employee benefit plan "shall be deemed to be an insurance company or other insurer." This implies that: A State cannot claim that an employer with a self-insured plan is doing "insurance business" and thus must pay a premium tax. A State cannot require self-insured plans to conform to the same requirements pertaining to insurance companies, including contract filing rules, reserve requirements, and capitalization requirements. 

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With self-insurance, who provides the services presently provided by our insurance carrier? 

TPA of Georgia will provide all claims payment and other services necessary to handle your self-insurance program. 

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How do I determine whether my firm should self-insure? 

A study based upon claims, premium history, and current employees will show whether self-insurance is right for you. TPA can perform such a study after you submit the following: 

  • Current employee census, listing ages of employees, sex, family status (whether or not the employee has dependents to be covered) and salaries, where applicable. 

  • Claims experience for the most current three years, by line of coverage, if possible. 

  • Number of covered employees during the three-year claims period reported. 

  • Premiums paid for the most current three years. 

  • Copy of the Master Contract, employee booklet, or other benefit document, plus any changes in coverage during the last three years. 

  • Copies of governmental disclosure materials, as submitted to the Department of Labor and IRS. 

  • Any other pertinent material providing important information regarding any aspect of your plan, such as singular large claims. 

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How much does a self-insurance study cost? 

You are under no obligation and are not charged for our benefit study. We perform these studies routinely before agreeing to accept a case for claims administration. However, no charge is made unless you elect to appoint us as administrators to your group plan, at which time we will quote a fee based upon the size and complexity of your plan.

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