DO IT YOURSELF INSURANCE (SELF INSURED PLANS)
Tired of paying premiums to an insurance company, but still want a full health and dental plan for your business? Self insurance may be right for your company.
Extended health and dental insurance is generally a “flow through” benefit that has, in the past, normally been administered by insurance companies.
Here is what happens: the insurance companies charge a premium for the benefits and pay the claims during the year. At the end of the year they assess whether or not they have made the required margin of profit, and adjust the premiums for the upcoming year accordingly. The average profit margin on a 20-person group is approximately 42%. Eg. if the claims ratio is 70%, the margin is 70/30, or 42.8%. Over the first few years of a contract the insurance company builds a reserve for the client and this reserve is used to pay claims that are above the premiums. When the client eventually leaves to go to another insurance company, that reserve then becomes part of the insurance company’s general coffers.
When a company self-insures they take the risk of higher claims than premiums, but they also reap the rewards if premiums are less than claims. Any reserve that is built up is an asset of the company that is self-insuring.
As administrators and adjudicators, we do all of the work of the insurance company and charge a fee for our service. We also put insurance coverage in place where it is needed. For example, we arrange for stop-loss insurance that caps the company risk at $3500 per person for medical claims. After $3500 in a year, the insurance company picks up the cost.
We also negotiate out of country coverage so that the company isn’t on the hook for huge expenses. The life and disability benefits remain insured through the regular channels. NOTE: there can be a case made for self-insuring the weekly indemnity, since it tends to also be very claims-sensitive.
We can analyze your benefit plan and let you know whether or not a self-insurance plan fits your company. We need the claims experience and claims for the past 3 years in order to do the analysis.