Many small Vermont businesses have realized significant savings in the cost of their group health insurance by selecting a high deductible and/or high co-insurance level benefit plan, and subsidizing the out-of-pocket charges incurred by employees (and dependents) down to a desired level, perhaps commensurate with the prior fully-insured medical plan. The Plan Sponsor has a great deal of discretion in designing the supplementary component of the health plan, although simplicity can be key to a successful program.

Supplemental Health Insurance Plans combine traditional high deductible group insurance with a modest degree of company reimbursement derived from the premium savings of the underlying coverage. The size of the calendar-year deductible is predicated on the size of employer group and the owner's risk tolerance. Overall plan savings can be realized because typically a small percentage of the participants incur the greater portion of the aggregate SHIP claims, while a majority of enrollees have relatively little or no utilization.

Having worked with self-funded and SHIP medical plans for many years, Ben Bosher and BDS can objectively assess if such a plan will work for you and lay out the risks and rewards when compared to your current health plan.

The SHIP consists of the following components:

1. A Group Health Insurance Policy: An indemnity, PPO, HMO, HSA or HRA policy having a high deductibles and/or co-insurance levels is purchased by the Employer to create a cap of exposure from expensive, unpredictable claims. Several carriers offer such plans in Vermont.

2. Plan Administration: Two options are available:

• A) A small company may wish to self-administer its Plan by having employees bring in their Explanation of Benefits statements received from the insurance carrier; the Employer then pays the supplemental benefits directly to the employee, and the employee is responsible for the payment to the provider. A record of the disbursements for each member is maintained by the in-house administrator.

• B) The Employer can contract with a Third Party Administrator (TPA) to manage the Plan. A professional TPA delivers many reliable services to ensure efficient and accurate administration of the SHIP plan's provisions. It is also required to maintain the privacy of individual participant's Protected Health Information. In this case the supplemental claims are paid directly to the providers and hospitals, and a second Explanation of Benefits statement is generated by the TPA to the employee. The Employer maintains adequate funds in an account that the TPA can access for payment of claims. The TPA charges a modest monthly administration fee for its services.

3. Claim Fund: The Employer deposits money into a claim fund to cover the anticipated cost of the supplemental payments under the Plan, including a reasonable cash reserve to cover the "run-out" of claims should the employer decide to discontinue the SHIP plan. Typically a portion of the savings realized through the adoption of the SHIP (when compared to the higher premiums of a rich-in-benefits, fully-insured health plan) will more than cover the required funds to pay claims. Some companies, however, simply advance the funding amounts to the TPA out of current cash flow.

* An indemnity plan has one set of medical benefits and offers no medical network, PPO refers to Preferred Provider Organization medical plan which has both richer benefits when seeing in-network providers and facilities and a less rich set of benefits when utilizing out-of-network services; HMO stands for Health Maintenance Organization in which a Primary Care Physician manages all of a patient's medical care and makes referrals to specialists; HSA is a qualified high-deductible Health Savings Account plan with accompanying HSA bank account; and HRA stands for Health Reimbursement Arrangement medical plan in which an employer allocates funds annually to each participating employee and their dependents for reimbursement of approved medical expenses.