Capitated payments to Providers by self-funded health plan

[jeanine]

Self-funded company wants to try to control costs by capitating payments to providers. Asks the TPA (which provides a network of preferred providers) to negotiate a capitation scheme that other self-funded payors will use as well.

Is this allowable? If it is allowable, what is it considered? I don't think this is an insurance arrangement but I don't know. Comments?

[Bill Ecklund]

The employer has adopted a self funded medical plan which is allowed by law. It is an employee welfare benefit plan under ERISA, which means it is subject to the reporting and disclosure requirements of ERISA. Contracts with providers can be negotiated on behalf of the plan. Since it is an ERISA plan, it is exempt from the application of state insurance laws.