“If it’s too good to be true, then it probably is” and “buyer beware” are common phrases used in our everyday language. Yes, these are generic and somewhat overused sayings, but there’s enough truth to them that they get repeated often as warnings to potential purchasers of goods and services such as real estate, financial investments and insurance.
As someone who specializes in the niche markets created in the wake of the ACA designed for the contingent workforce, I’m reminded of these sayings often. There are dozens upon dozens of different MEC/MVP offerings for staffing, retail, hospitality, security and restaurant companies to choose from. Moving into the self-funded world of TPAs you leave the security of the traditional national carriers behind and enter an arena where it’s vitally important to understand the type of coverage you’re purchasing.
To help navigate these often-turbulent waters, here’s what to consider before entering into a self-funded contract:
- Request and review the actual stop-loss contract. There’s no bigger red flag than an insurance company or solution not being able to produce a stop-loss contract.
- Find out the amount of the stop-loss coverage. In the world of ACA plans, it’s not uncommon for the stop-loss contract to only cover $1 million in claims over the aggregate. While this may be enough for some, it may fall short of the necessary coverage for larger employers.
- Learn what happens if the stop-loss contract terminates due to nonpayment of premium to the carrier because of eligibility audits by the TPA. You may still be on the hook for those claims, even if you remitted max payments to the TPA.
- Ask yourself why would an insurance company be willing to take an unlimited risk position at this specific price point with little to no participation required?
“Ignorance is bliss” won’t provide safe harbor in the event your coverage turns out to be less than expected. You, as an employer, are the legal plan administrator and are bound by ERISA to fulfill the promises made within your benefit offering, including being 100% financially responsible to fund all benefit claims incurred until the plan is legally terminated. This provision is especially risky in the event a stop-loss contract becomes void or was never in place to begin with. You could be left with a truly uncapped exposure.
This is by no means meant as a scare tactic. The majority of self-funded plans offered by TPAs are structured correctly, but it only takes a handful of bad apples to ruin it for the bunch.
If you have any questions or would like to discuss self-funding in more detail, please reach out to a member of the ‘A’ Team.
ABOUT THE AUTHOR
Austin Morgan is a Client Services Director on Assurance’s Staffing Employee Benefits Team. With seven years of employee benefits experience, he focuses on staffing firms and helping his clients become compliant with the Affordable Care Act (ACA). Austin elects to take a hands-on, client-focused approach to understand each client’s unique needs so he can craft the most appropriate solution. Austin is a current member and former board member of the Chicago Northeastern Illinois Association of Health Underwriters. He received his Bachelor’s degree from Augustana College.