Self-funded health plan

[Guest Melissa Winslow]

I need some guidance on if/how I need to file for my employers health plan.

According to documents received from the insurance company, our plan is a self-funded group contract. We pay the insurance company a "premium/fee" each month based on the number of employees we have. A portion of this fee is funded by our employees. And, we are billed monthly for the benefit checks the insurance company writes each month. We have about 25 employees.

According to 29CFR 2520.104-20, it would seem that we may be exempt from filing form 5500. However, I'm not sure that reimbursing the insurance company for claims paid qualifies us under item (B)(2)(ii) of that section (discusses benefits being paid solely from the general assets of the employer). I am leaning towards being exempt since it would seem we are just hiring the insurance company to administer the plan rather than having them "fund" it.

Any thoughts?

[mroberts]

All health plans are subject to ERISA unless they are only covering the owners. Even though you are self-insured, the medical plan you are offering is deemed an employee benefit plan.

Just out of curiosity, why are you self-insured if you only have 25 employees? One bad claim and you're done.

[Guest Melissa Winslow]

The owners were "sold" this type of plan under the idea it would be less expensive than a traditional health insurance plan. Our current plan has a stop-loss agreement for claims exceeding $10,000. So far it has been slightly less expensive than the previous plan they had.

[mroberts]

The problem is if you ever had a bad claim, you will not be able to get stop loss coverage or it will triple or quadruple. At that point, you would have no choice but to then go fully-insured. The carrier would also realize this and totally take advantage of the situation. It's always better to make the move to fully-inusred rather than having it forced upon you.

I would never recommend self-insuring unless you had at least 250 lives. If you would like to discuss a little further, just send me an email from my profile and we can talk about it.

Thanks!