What is Self-Funding?
Self-funding is assuming all or part of the risk in exchange for much lower premium charges. A group can purchase two types of reinsurance:
• Specific Stop-Loss: Reinsurance carrier will pay for all claims over a designated Specific Deductible. (Employer is responsible for all amounts up to the Specific Deductible). For example:
• Aggregate Stop-Loss: Aggregate reinsurance is designed to put a cap on the total claims for the entire group (under the Specific Deductible). For example:
Why Choose Self-Funding?
Self-funding benefits employers in many ways:
Control of plan design
Administration tailored to the employer's needs
Cash flow benefits - you hold your own reserves
Return on investment for reserves
Cost and utilization controls - access to many discount programs
Effective claim processing
Lower cost of operation - administrative fees are lower by nature
Elimination of most premium tax
Carrier profit margin & risk charge eliminated
Mandatory benefits avoided - state mandates can be avoided as self-funded programs are governed by ERISA
Risk management effectiveness through stop loss insurance - employer may choose the amount of risk to retain
(Source: Stop Loss 101, Duncanson & Holt Group)
What is a TPA?
TPA stands for Third Party Administrator. A TPA is a professional organization hired to perform the administrative duties of an insurance company such as:
These are just a few of the administrative duties that a Third Party Administrator performs. If you would like to learn more about our TPA, please feel free to
contact us.