Having worked for a third party administrator in Vermont marketing self-funded medical plans for 5 years, Ben Bosher of Benefit Design & Strategies (BDS) is an expert in implemeting and evaluating the success of this method of funding a medical program. A partially self-insured health plan is not for every company, so let us help you determine whether your firm is a candidate for such a plan.

The potential savings usually associated with the self-insured concept can best be understood by explaining the difference between a fully-insured health plan and the self-funded alternative. Built into the rates of traditional, fully-insured health plans offered in Vermont are comparatively high-priced administration costs, the Vermont state premium taxes (charged to for-profit insurers), re-insurance pooling fees, state-required claim reserves, a risk margin to further protect the insurer and, in the case of private carriers, net profit. Another contributing factor to driving up plan costs are the numerous state medical mandates dictating coverages for specific medical conditions or types of providers. When covered by a fully-insured medical plan, a company has no opportunity to recieve a premium refund at the end of the plan year should actual claims utilization be consistently and substantially lower than that projected by the insurer.

Vermont companies and non-profit organizations with 50-plus employees - in some cases with as few as 35 employees participating in your medical plan - should at least examine the self-funding option to determine if there might be a good fit, for the simple reason that the partially self-insured health plan is usually the most efficient and cost-effective model for delivering health coverage to employees.

Vermont employers are urged to contact Benefit Design and Strategies to determine if a partially self-insured health plan is a good fit for your company. Ben Bosher, the principal of Benefit Design & Strategies LLC, has the knowledge and experience to assess the appropriateness of this type of plan for your company and to explain the specific advantages and disadvantages of this concept for your firm and your employees.

Following a favorable initial evaluation, BDS will procure proposals from Third Party Administrators (TPA's) and re-insurers to produce a concise and easy-to-understand report with recommendations. The implementation phase entails hiring a competent TPA, offering guidance on the content of the Plan Document, conducting employee meetings, managing enrollment and following up to ensure the plan is running properly.

A PRIMER

With a partially self-funded medical plan, a finite portion of the claim risk is shifted from the insurer to the employer (the "Plan Sponsor") in exchange for the potential of significant overall savings. Aside from lower plan costs, additional rewards include greater efficiencies in plan administration and greater freedom to design a health plan that best suits the company's culture and the needs of the employees. In addition, this approach gives the Plan Sponsor more information in a timely manner about the group's claims utilization so as to be proactive in making intelligent adjustments in Plan coverage, should a change in benefits become necessary.

The role of the TPA is to administer the medical plan, process and adjudicate claims and manage the intricate details of the plan. The Plan Sponsor directly advances money to cover the predictable and routine medical claims through a working fund administered and accounted for by the TPA. Liability is capped at the maximum ceiling per participant (the specific stop-loss level), after covered employees and/or their dependents have satisfied the Plan's calendar year deductible(s).

Two policies are purchased to protect the Plan Sponsor against unpredictable large claims:

• SPECIFIC STOP-LOSS RE-INSURANCE to cover claims during the Plan Year of any single individual on the plan once the pre-established specific deductible threshold has been met, and

• AGGREGATE STOP-LOSS RE-INSURANCE to cap the employer's liability against the Plan experiencing unusually high cumulative claims among all participants during the Plan Year.

Health plan savings are realized through substantially reduced re-insurance premiums, greater efficiency and accuracy in the Plan's administration, and strict application of the plan parameters outlined in your Plan Document. To further reduce plan costs, a medical network is incorporated to take advantage of provider and hospital discounts.