Self Funding Insurance 101

Today in the health insurance industry, we often hear of fully-insured policies and self funded policies.

Most people are very familiar with fully-insured policies, which companies have offered to their employees for many years. Because of the rising cost of health insurance, employers are now starting to inquire about self funded insurance policies.

What is a Self Funded Insurance Policy?

Self funded insurance is also known as Administrative Services Only (ASO). With ASO, the employer provides health or disability benefits to employees with the employer’s resources. With fully-insured insurance, the employer works with an insurance company to provide coverage and benefits for its employees. In self funded insurance the employer assumes direct risk for payment of claims for the benefits. To help offset the monetary liability of self funded claims, the employer will purchase stop loss insurance from an insurance carrier.

What is Stop Loss Insurance?

Stop loss insurance is a policy that provides for risk retention limitations on a distinct claim and aggregate claims basis.  What do we mean by a distinct claim stop loss insurance? This kind of insurance covers extreme losses for an individual person covered by the plan.

If the individual would have a catastrophic illness or injury, which would cause extremely high medical expenses, the distinct stop loss coverage would start when the bills would exceed a certain level as defined in the policy. In an aggregate claim, the stop loss coverage protects the employer when the total claims by the entire group exceed a certain level.  In the stop loss plan, it is run only between the company and the stop loss company. There is not explicit risk to the individuals that are protected by the plan. This is a very important difference between the fully-insured plan and the self funded health insurance plan.

Is Self Funded Insurance Right for Your Business?

Is a self funded insurance policy something that could benefit you, the employer, as well as your employees? The expert agents at Kincaid Benefits will be happy to sit down and discuss with you the advantages of self funded insurance for your company. We’ve been helping small businesses in the Tri-State area (Evansville, Newburgh, Jasper, Vincennes, and beyond) for many years.

Please contact Melissa Middleton or Susan Cross to see how you can offer affordable health insurance coverage to your employees!