A Different Approach to Employee Benefits
There are two key components to a benefits plan: insurance to protect against risk, and administration to effectively handle transactions.
- Life Insurance, A.D. & D., and Long Term Disability benefits are risk intensive, and require insurance.
- Health and Dental Care benefits are administrative in nature. These benefits operate primarily on a “money in, money out” principle rather than requiring traditional risk insurance.
Extended Health and Dental benefit expenses are most economically covered by examining the group demographics, benefits plan design, and claims experience of each employer. From this information, we can establish a contribution budget for claims expenses and set up a managed fund that will meet these claims. We monitor employee claims experience to refine the prediction model and the budget.
The claim funds are held in trust, and properly managed, they will meet the claims cost. Each individual corporate employer member of the Trust is responsible for all of its own claims costs, plus plan operation costs. The Trust does not own any excess funds “held in reserve” by the client for incurred but not reported claims, so that each client’s money remains under their control, not locked away at the insurance company.
Catastrophic Risk Insurance
Catastrophic risk elements of the benefits plan (Life Insurance, A.D. & D, and Long Term Disability) are insured in a traditional fully insured pool.
Exposure to catastrophic medical claims, such as some of the new “prescription drug cocktail” treatments, is limited with Stop Loss insurance above a certain pre-established limit, most commonly $5,000 per insured individual per year.
Stop Loss insurance is designed primarily for potentially catastrophic health care claims such as prescription drugs, hospital claims, and out-of-country claims. Out-of-country claims are fully insured (pooled) from the first dollar claimed. All other expenses are fully insured after a $5,000 deductible per person in each calendar year. Other health care claims such as paramedical services are covered by Stop Loss insurance, but these claims will be limited to their prescribed maximums within the benefit services contract.
This approach enables employers to purchase insurance protection where appropriate, and allows control over budgeted health and dental care expenses associated with low cost, high occurrence claims. The end result is greater control over benefits costs and more flexibility in benefit plan design.