Fewer employee benefits are as hotly debated and misunderstood as level-funded and self-insured health plans. There’s no denying an ability to tailor benefits to the workforce for cost savings and a greater level of transparency that also offers control. Concealed beneath their surface, however, lies fiduciary and financial responsibilities as well as risks — all of which benefit advisers need to do a much better job of understanding and disclosing to their clients.
The most egregious misstatement about these plans (both of which are self-insurance) is that they are “no riskier than a fully insured plan.” The major reason given for this falsehood is that employers buy a stop-loss policy. Yet like all insurance policies, stop-loss policies contain limitations, conditions and exclusions. Understanding these elements is vitally important to properly underwrite the risk and provide correct coverage.
