"Offering an Alternative to Traditional Health Benefits, Delivered With a Heart for Service"
Compliance & Regulatory Requirements
Regulatory Requirements
A written plan that describes the benefit structure and guides day-to-day operations;
A trust fund to hold the plan’s assets;
A recordkeeping system to track contribution and benefit payments, maintain participant and beneficiary information, and to accurately prepare reporting documents; and
Documents to provide plan information to employees participating in the plan and to the government.
Summary Plan Description (SPD). Create and distribute SPD to plan participants. (Many insurers provide SPDs or benefits booklets for free for insured plans, but usually charge an additional amount or simply do not provide for a self-insured plan for which insurer is the TPA.)
Plan Document. Create plan document (can be a wrap-around or “wrap” document); not required to distribute but must provide to participants if they request a copy (in writing). Plan can have a combined Wrap Document and SPD (which must be distributed since it is an SPD).
Other Employee notification requirements. CHIP, GINA, HIPAA Privacy, MHPAEA, NMHPA, WHCRA, PPACA (e.g., SBC, Grandfather status), ERISA* (e.g., internal claims and appeals and external review).
Form 5500. File if plan has at least 100 employee participants as of first day of plan year. (If plan has a trust that holds assets, must file Form 5500 regardless of number of participants.)
*Self-funding was made possible by the passage of the Employee Retirement Income Security Act of 1974 (ERISA).
Reporting Requirements
HIPAA Notice of Privacy Practices. A self-insured plan must distribute its own NOPP. (Exception: NOPP is not required for a self-insured plan that is also self-administered and has fewer than 50 eligible employees.)
The New York Public Goods Pool is a fund created by the state of New York to finance health care initiatives and care for the indigent within that state. All health insurance plans, insured and self funded, are required by law to pay the tax. Plans can:
Prescription Drug Data Collection (RxDC) Reporting. Insurance companies and employer-based health plans must submit information about prescription drugs and health care spending.
Due Diligence
Employer would have fiduciary responsibility if they become self-funded. It is the employer’s plan, and the employer must take responsibility for it.
Establishing a long-term relationship, not a year-to-year transactional arrangement is best to reap the benefits of being Self-Funded.
While the rule of thumb is that the bigger the employer, the more likely they are to be a viable candidate for self-insurance, that’s not always the case if they do not have enough cash flow to pay claims and wait for reimbursement from the stop loss carrier.
What tradeoffs is an Employer willing to make between costs and the types of benefits they want to offer.
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Do they value reduced costs over reduced volatility?
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Do they value ease of administration over cost?
Determine what an Employer can do or is willing to do to control costs.
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A college that employs tenured professors might take a very holistic life approach to chronic disease management.
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A fast-food company might forgo efforts on long-term disease management and instead focus on creating a narrow network of providers to reduce the costs.
Choose the right administrative service partner.
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Insurance carrier ASO can be simpler, but perhaps not as cost-effective.
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Independent third-party administrators often provide the same administration services but may offer a greater degree of flexibility.
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One advantage of using a TPA is if the employer becomes dissatisfied with a specific vendor’s services, the employer can change it without disrupting the plan completely.
Find the right Stop Loss policy.
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Make sure the stop loss policy covers everything the plan does (mind the gaps)
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Evaluate several stop loss policies from different carriers (they have different exclusions and terms).
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Employers with 50 to 300 employees should have a “no laser on renewal feature” with a limit on the renewal premium increase.
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Contracts should also include a maximum rate increase, specific advance, monthly aggregate accommodation and gapless renewal options and some offer an experience refund option that returns a portion of the premium if stop-loss claims fall below a defined threshold.
Help the Employer monitor success
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Successful self-funded plans typically have executive teams that have decided that they are going to take control. They will take time to structure and manage a plan in a way that leverages all the advantages of self-insurance.
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The most appropriate analysis for self-funding initiatives considers multiple years, best way is to measure success over a longer period, say three to five years. The idea that self-insureds have more risk evaporate quickly when analyzed on a multi-year basis.