In our modern times, with the dawning of what will surely be a complicated transition into The Patient Protection and Affordable Care Act (also known as Obamacare) and many Americans feeling ultimately failed by the insurance industry, employers are looking for viable solutions to what many feel is a fundamentally flawed system.
In response to these sentiments, one potential solution has emerged: Self-insured health benefits plans--but what are they, and how do they work?
Ron McCurry, founder of Alaska Employee Benefit Specialists, is all too eager to tell everything about self-insured benefit plans. As a former electrical contractor who ran his own business for 10 years, McCurry has sat on the opposite side of desks such as his.
"I have a clear understanding of cash flow," he says, "and understand what happens when that seizes up. I understand that we need to keep employees happy, but we can't break the bank to get that done."
AEBS deals almost exclusively with employee health benefit plans--mainly medical, dental, vision and disability-and McCurry emphasizes that it is his job to figure out the most cost-effective way to get these products into the hands of the client.
"Self-funding is simply the same type of coverage--medical, dental, vision--unbundled from the fully-insured components, and set out there in component pieces," McCurry explains. "Inside any given premium would be things known as margin--that's the insurance company's profit--administration, retention and claims ... In the self-funded world, I eliminate some of those. I don't have margin and retention that I have to deal with. We simply have administrative costs," which are handled by a third-party administrator of the client's choice.
There is, logically, an insurance component in self-insured plans: Specific stop-loss insurance, which equates to a deductible for the employer (the larger the employer, the larger the deductible can be), and aggregate stop-loss insurance, which protects the employer and the plan in the event that there are huge "runs on the bank" in smaller claims over a 12-month period.
"We come up with what would be known in the self-funded world as a maximum liability: What is the most that this employer could pay for those benefits in a year if everything went really, really bad? Then we compare that to a fully insured rate."
This naturally puts the company's emphasis on the overall wellness of its employees.
"If you had a miracle year, where none of...