Self funded medical plans contain several pieces which, when brought together in a knowledgeable way, allow the employer more control over their medical costs. Most self funded plans contain a four main components including:
Third Party Administrator: The TPA is very important as they are holding your check book. They are responsible for paying claims, tracking enrollment, disease management, utilization review, and many other scary sounding things. They charge a flat PEPM administrative fee for these services and are considered a fixed cost. The needs of your client will determine if a TPA or insurance company will be the best fit to administer your plan.
Stop Loss: Stop Loss is perhaps the one component that causes the most anxiety. Stop loss coverage comes in two types, Specific and Aggregate. Specific Stop Loss is designed to protect you against any one claimant costing you significant claim dollars. Aggregate stop loss is to protect the employer from the total cost of all claims, across the group as a whole, from costing the employer significant claim expense. Within Specific and Aggregate, there are many different contract types; each intended to be utilized for a particular employer with particular considerations.
Pharmacy Benefits Manager, (PBM): Many brokers and employers forget about this component. A PBM must be partnered with in order to offer prescription drug coverage to your client’s employees. They do much more than provide a pharmacy benefit though. They are potentially the best window into participant disease states and are critical if the employer is serious about wellness and disease management.
Network: Remember, self funded plans pretty much always operate as a PPO or EPO so the network of providers for the client’s employees to utilize must be ‘rented’. This is an important consideration as network selection impacts Stop Loss pricing.