Long before the Patient Protection and Affordable Care Act was first implemented in 2010, brokers have helped clients save money and avoid certain restrictions by introducing self-funded health plans as an option for business owners. For years, self-funded health plans have been a smart alternative for these clients to reduce their overall cost of benefits for their employees, and to have close, hands-on management of their plan by working with a third party administrator.
Successful self-funding by employers has two main components: First, developing a well-managed self-insurance program, and second, applying risk management procedures in the form of stop-loss arrangements. Stop-loss coverage, which reduces the financial risk associated with self-funding, protects the plan sponsor against catastrophic claims beyond a predetermined amount, known as the specific attachment point. Think of the attachment point as similar to the role of a deductible in an individual’s health insurance policy.
