Self Insured Health Plans – When an Insurance Company Isn’t the Insurance Company

To those not involved in the day-to-day workings of health insurance, it all can look the same.  You pay a premium and hopefully when you have a claim, the insurance company makes their share of the payment.  But not everything is as it seems.  Many times what you think is the insurance company is nothing more than a claims payment system.  When you have problems with claims getting paid, your beef may actually be with an organization much closer to home.  You might be a member of one of many self insured health plans in the country.

What are Self Insured Health Plans?

Self insured health plans are typically used in group health insurance.  Instead of a typical plan in which a policyholder pays a monthly premium and the insurance company pays claims, in a self insured (also know as self funded) arrangement the policyholder (the employer in a group plan) contracts with a claims administrator (called a Third Party Administrator, or TPA) to only pay claims.  The employer pays a fee to the TPA to process these claims.  The employer then pays the claims, not an insurance company.  The “premium” that the employer pays is actually a funding rate that is used for budgeting and COBRA purposes.

The reason that people can be confused about who is the insurer is that nowadays most insurance companies also perform TPA functions.  This allows group insurance plans to tap into the network discounts of the insurance company.

Self insured health plans leave the employer at risk of paying more out in claims than they budgeted.  However, there is less fixed expense in a self funded plan than a fully insured plan.

You will see a self insured plan more often with large groups since it is easier to predict the future claims of a large group than a small group.

How Do Self Insured Health Plans Affect a Plan Subscriber?

If you are on a self funded plan, it is important to note that if you have an issue with a medical expense being covered, your beef is not with an insurance company.  It is with your employer.  Self insured health plans dictate to the TPA what is covered and what is not.  The TPA is then required to administer the plan the way the group wants.  Of course, group plans must still adhere to Affordable Care Act guidelines.

That doesn’t mean that the TPA doesn’t make mistakes in claims processing; that still happens occasionally.  But if you are part of a self insured plan, determining what is covered is up to your employer.

How Do I Know if I’m Part of a Self Insured Health Plan?

There really is no way of knowing for sure if your employer’s plan is self funded unless you ask.  If you are part of a large group, the odds are that the plan is self insured.

As for the actual mechanics of a self insured plan, there is no difference as far as you are concerned.  You see a doctor, pay your share of the claim, and the rest gets paid by someone else.  Just know that if a claim is excluded from the plan, you should discuss with your employer first.

Self insured health plans are good options for everyone involved.  They help keep costs of insurance down for the plan, which allows an employer to hopefully keep the cost to their employees as low as possible.  Make sure you know who to go for if you have questions about your claims.

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