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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