Employers and unions can opt to assume the full risk of paying their medical claims. In assuming this risk, they are able to create their own medical insurance policies which are similar to those provided by a medical insurance carrier. Self-funding medical insurance is one way they can keep cost down.
A Third Party Administrator (TPA) may be contracted to provide certain administrative services such as the processing of claims. Even though you may have an insurance card from the TPA, it is your employer or union who actually manages your policy. They advise the insurance carrier what will be considered a covered benefit.
How Does This Impact You?
Self-funded programs are exempt from State insurance regulations. Companies who wish to provide self-funded policies must comply with Federal guidelines found under the Employee Retirement Income Security Act (ERISA) of 1974. Even though the State insurance regulators require insurance companies to provide a certain benefit, they cannot direct policies which are fully funded by employers or unions.
Here’s an example of how it might affect you:
You have struggled with your weight for many years and have failed every known diet. As a result of your weight, you have developed hypertension and diabetes. You and your physician agree that a gastric bypass would be the best option for you at this time. Believing that you will easily qualify for the procedure, your physician submits the request to the medial insurance carrier.
You receive a letter from your insurance carrier informing you that your request has been declined. You contact the reviewing nurse arguing that the company is spending more to treat the complications related to your obesity than it would for the surgery itself. You inform him/her that you will sue the company and bring your case to the media.
The nurse reviewer informs you that, while your request meets the medical guidelines, your employer does not provide a benefit for gastric bypass surgeries. Because there is no benefit for the procedure and the company you work for will not make an exception, the insurance company was forced to decline the request.
As the law currently stands, because the health insurance company is only the messenger, they cannot be sued. Your company does not have to provide you with the same benefits of a fully insured plan. Benefits they provide must comply with the ERISA guidelines.
Any complaints or concerns must be addressed through the United States Department of Labor (US DOL). The US DOL website, under the topic of "Consumer Information on Health Plans", provides a wealth of information.
Most large corporations and unions provide self-funded plans. By controlling the benefits offered, they can help control the costs. While some plans are very generous with the benefits they offer, others are extremely limited.
One reason for the extremes in coverage from one employer or union to another is based on the funds available for healthcare coverage. As health care costs and the number of individuals accessing healthcare services increases, you may see a decrease in the number of benefits provided and/or be required to cover a higher percentage of costs for your healthcare.
Rather than managing your insurance policy themselves, your employer may have elected to fully fund a medical insurance provider to control all aspects of your health benefit. From a benefit perspective, self-funded and fully funded plans may look the same. They differ significantly in how they are regulated. While self-funded plans fall under Federal regulations, fully funded plans are subject to State regulations.
The easiest way to determine if your plan is a fully funded or self-funded plan is to contact your human resource representative or the TPA/insurance plans customer service representative.
Frances Harmon, RN, BSN, PHN, with her husband, Doug, is the founder of Your Healthcare Information Guide, an online resource meant to instill best practices in advocacy for patients and professionals.