How is a "self-insured" medical plan supposed to be termina

[Moe Howard]

Can an employer simpy discontinue its "self insured medical plan" or must it jump through a few hoops first (such as inform the employees a certain number of days prior to ending the plan, get IRS approval, etc...).

Anyone know of any literature I can read regarding termination of a self insured medical plan ?

[mroberts]

The termination process should be spelled out in the contract. Notice to the employees should be either 30 or 60 days. Remember that you will be responsible for claims processed during the run out period, which is once again defined in the contract.

[Kirk Maldonado]

MRoberts:

What contract?

This is a self-funded plan. It might be a small arrangement that just covers the portion of the costs that aren't covered by insurance, so there might not be any contract.

[mroberts]

Sure there's a contract. Perhaps I should have said agreement. A company just doesn't decide to go self-funded one day and start paying any medical bills that are incurred by its employees. You contract with a TPA, whether it be a carrier or independent administrator, and the agreement you sign with the TPA governs the plan. I'm sure somwhere in the agreement it oulines how much time you need to give the TPA before you cancel the plan and this amount of time can correspond with the amount of notice you need to or should give your employees.

[GBurns]

Any sort of employer plan self funded or not has to have documents establishing the plan. There is the Board Resolution, the Adoption Agreement, the Plan document, the SPD etc etc. Something has to spell out what the plan is, how it operates, what is provided and ERISA rights etc etc.

Somewhere in all of this there will be a plan year specified and any renewal or termination procedures.

Remember I am talking about the Plan, not the components of the plan such as health benefits coverage, which might be insured or self-insured. The health coverage is not the Plan.

[Kirk Maldonado]

I disagree that a TPA is always involved. I've had several small clients set up plans where employees were reimbursed for expenses that weren't covered by insurance that self-administered them.

Admittedly, self-administration is not a terribly bright idea, but it is done from time to time.

[GBurns]

Kirk,

Self administration of a small 105(B) medical expense reimbursement plan might be okay, but I doubt that this is what was meant by the term "self-insured medical plan" as posted by Moe.

Moe,

What type of coverage did you mean?

[mbozek]

Since a self funded health plan does not have any assets there is no termination approval by the IRS. The Employer can simply send a Summary of material modifications to the employees informing them of the effective date of the changes. (EG: The self funded benefit plan will be terminated for expenses incurred after 12/31/02). The SMM can double as authority to terminate the plan. A board resolution to terminate is required ony if the employer established the plan by corporate resolution. Most state corporation laws do not require board approval to establish a health or welfare plan and few employers seek board approval.

Kirk is correct. Small employers frequently set the plans up with a minimum or lack of paperwork and run the program without any TPA or formal approval process to save money.