FAQs

What is The Jefferson Health Plan?

What is meant by "partially self-insured"?

What are the advantages of self-insurance?

Are there any disadvantages to self-insurance?

Are there certain plan designs offered by the consortium?

How is the consortium structured?

Can you tell me more about how reserve balances work?

Where do my employer contributions to the consortium go?

How are member reserves invested?

 

 

 

 

 

 

Under a self-insured (also referred to as "self-funded") benefits program, employers assume some of the duties of an insurance company.  They pay claims with the money ordinarily earmarked for insurance premiums.  This provides the opportunity for savings, since no money is spent on the usual risk and profit charges typically built into rates required by insurance companies.

 

To provide an extra measure of financial protection against catastrophic claims, however, self-insured employers typically buy stop loss insurance through an insurance carrier or a company specializing in stop loss coverage.  Stop loss coverage provides reimbursement from an insurance company primarily when single claims exceed a pre-determined amount (like a deductible), or when total claims are above a certain level.  The policy deductible will depend on the employer's size, the nature of its business, its plan of benefits, financial reserves, prior claims experience, and tolerance for risk.  A plan that purchases stop loss insurance is considered to be partially self-insured.

 

The Jefferson Health Plan takes partial self-insurance one step further by combining similar entities to share the risk of fluctuations in claim costs inherent in the self-insurance plans of smaller employers.  This is accomplished through the use of a Large Claims Reimbursement Program.  This Large Claims Reimbursement Program provides the benefits of an annual liability cap through the means of the large financial reserves held by the consortium.

 

 

 

 

Of course, there are many advantages to self-insurance, which is why nearly all large employers are self-insured.  Advantages include:

   

   •  Long Term Solutions - Providing employer-specific benefit programs to public

      entities since 1985

 

   •  Financial Security - Member organizations and The Jefferson Health Plan are holding over
      $160,000,000 in reserves

   •  Multiple Network Options - Member organizations choose from a wide variety of regional and
       national health care networks for the delivery of their benefit plans

   •  Reporting - Online, 24-hour access for the member organization to their reserve account
       activity, as well as monthly income and expense reports provided by The Jefferson Health Plan

       auditor

   •  Tax savings due to the Affordable Care Act up to approximately 5%

 

 

 

Self-insurance is not appropriate for every employer.  Effectively realizing the advantages of self-insurance means that an employer must be willing to accept certain risks and exercise discipline over eligibility for benefits, the plan of benefits provided, and the funding of the expenses associated with the plan.  Even then, self-insuring may not reduce costs every year.   The most obvious disadvantages associated with self-insurance are:

 

   •  Risk assumption, which means that the employer assumes the risk of the paid claims under the

       plan that are not covered by stop loss insurance

 

   •  Provision of services, which entails the employer's taking responsibility for contracting with the

       various vendors required to operate the plan of benefits

 

   •  Fiduciary duties related to any liabilities created by legal action

 

On the other hand, many of these disadvantages are lessened by membership in The Jefferson Health Plan.  For example, risk assumption is lessened through membership in the consortium, since the annual risk of claims fluctuation is spread across all participating members, and stop loss insurance is provided above a certain level to protect not only individual employers but the pool as well.  Further, members participating in The Jefferson Health Plan enjoy the advantages of group purchasing when contracting for other necessary services, since most such services are arranged through The Jefferson Health Plan.

 

At the same time, a self-insured employer must be willing to trade the complete security (and associated cost) of a fully insured plan for the possibility that actual costs will exceed what a fully insured plan would have cost in any given period.

 

 

 

 

The Jefferson Health Plan members have significant autonomy over the design and structure of their plans.  There are no common plan designs to which member groups must conform.  At the same time, the following basic rules apply to each member group:

 

   •  Individual member organizations retain autonomy over their plan design, subject to certain

       limitations

 

   •  Changes in member organizations' plans must be approved in advance by The Jefferson Health

       Plan and its re-insurers

 

   •  Changes in member organizations' plans must be reviewed and approved by the claims

       administrator

 

   •  A bronze plan is offered to meet the 60% actuarial requirement of the Affordable Care Act

 

 

 

 

The Jefferson Health Plan is an allocated balance model approach.  Within this structure, each member organization has ownership of its own reserve balance and earns interest income on those reserves.

 

The consortium also makes available several traditional pool arrangements, primarily designed for very small employers who have come together to pool their resources.  Within this structure there is only one reserve account for all participating member groups.

 

 

 

 

Financial reserves are maintained by The Jefferson Health Plan to provide rate stability and security to participating members.  Member reserves are commingled solely for the purpose of making investments within guidelines allowed under State law, but member reserves are accounted for separately in specified trust accounts.

 

Reserves are allocated among pooled reserves for large claims and individual reserves held on behalf of each member organization.  It is important to note that The Jefferson Health Plan member organizations own their own reserves.  Therefore, should a member organization decide to discontinue its membership in the consortium, The Jefferson Health Plan would issue a check to the organization for the amount of its reserves held within the pool of allocated member reserves.  The member organization would not forfeit its reserves; the funds would be returned to the member organization in full with accumulated interest.  Return of the member organization's reserves would, however, be subject to satisfaction of claims incurred prior to the decision to terminate consortium membership, as well as any administrative costs associated with the member's termination.

 

Likewise, should a member organization in deficit to the consortium decide to terminate its affiliation with the program, that member will be obligated to pay any deficit in full to The Jefferson Health Plan within 90 days of the effective date of its termination.  Further, such member will be fully obligated to pay any and all claims incurred before the termination became effective (IBNR). 

 

 

 

 

The consortium develops monthly funding factors for each member group, based on that group's claims experience.  Those factors are similar in nature to insurance company premiums, but they are not premiums, since membership in the consortium is a commitment to self-insurance.  Member groups are expected to make their contributions to the consortium on a monthly basis by the fifth of each month in accordance with invoices prepared by the consortium.

 

Member group contributions are to be transmitted to the consortium's trustee bank, U.S. Bank, for deposit into the member organization's trust account.  A full accounting of each member group's deposits into their trust account is provided on a daily basis by U.S. Bank online with a recap of such activity provided by the consortium's auditors each month.  Earnings generated on consortium member reserves are allocated to each member group in a pro-rata manner each month.

 

 

 

 

The reserves of member organizations are invested by a professional money manager engaged by the consortium to invest the funds of member groups in accordance with Ohio law.  Those laws limit the financial risks that public employers can take with their investments, but do permit investments in government-backed and certain other highly stable cash and cash-equivalent assets.  RedTree Investment Services has been chosen by the consortium as the investment manager of both member and consortium reserve funds.

 

All earnings received on the overall allocated balance reserve funds of the consortium are deposited on a pro-rata basis to member groups with positive reserve accounts each month.  Member groups who have deficit balances do not receive any portion of the earnings generated by the investments of the consortium.