Due to skyrocketing insurance costs employers have an option to either accept the annual rate increase from the Traditional Insurance Carrier, or to look to Self Funding as an alternative approach to gain control over rising health insurance costs.

Under a self-funded plan, the employer decides upon a plan of benefits with the assistance of an agent or broker and a Third Party Administrator (TPA), such as Preferred Benefit Administrators, Inc. This plan is often very similar to the plan currently provided on an insured basis, however the employer may improve cash flow and maintain better cost and utilization control by tailoring the program to meet the group’s unique health plan needs.

Reinsurance, also known as Stop Loss insurance, is arranged to protect the plan against excessive losses. Some of the things taken into consideration when deciding the amount of risk to be insured are the number of employees on the plan, the nature of the group’s business, the location, the plan of benefits, prior claims experience, and financial resources.

A Plan Document and Summary Plan Description are prepared, containing all of the provisions of the plan, including eligibility, coverage, and termination provisions. Preferred will prepare the employee handbooks, identification cards and other forms and materials necessary to operate the plan. Preferred then administers the plan by

• processing claims,
• maintaining eligibility and enrollment updates,
• preparing claims reports and other required data for the plan and the reinsurance carrier,
• maintaining compliance with ERISA regulations,
• billing and collecting any premiums and other fees.