How does self insurance work?
The employer decides on a plan of employee benefits, which can be similar to a plan currently on an insured basis or it can be altered to meet the needs of their employees.
Rather than obtaining medical coverages from an insurance carrier, the employer elects to fund the risk directly from contributions by the employer, the employee's or both. By self-insuring, the employer becomes liable for benefits covered under the plan.
Stop Loss insurance is designed to limit the employer's loss to a specified amount, to ensure that catastrophic claims or a multitude of unanticipated claims, do not upset the financial integrity of a self-funded plan. The amount of risk to be insured is a function of the employer's size, nature of business, financial experience and tolerance for risk.
A plan document is prepared and distributed to covered employees. The plan document contains all the provisions of the plan, including eligiblity, coverage descriptions an dplan limitations. The TPA assists in preparing the summary benefit descriptions, ID cards, managed care directories and other employee matierals.
The TPA administers the plan. Their responsibilities include maintaining eligibility, adjudicating and paying claims, preaparing claim reports, plus arranging for managed care services such as network and case management.