How to Provide a Self Funded Health Insurance Plan
A self funded health insurance plan can provide flexibility to both employers and employees. It allows employees to set aside cash for qualified purposes such as uninsured health care costs and the employees' share of premiums and co-pays for medical, dental, vision coverage and prescriptions. Such plans usually have tax benefits for employees. Administering such plans is now a normal function for most payroll services.
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Instructions
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Provide A Self Funded Health Insurance Plan
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1
Ask your payroll services company to provide you with the information, brochures, proposals and boilerplate materials it may have for administering a self funded health insurance plan for your employees.
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2
Consider designating your payroll services company as the plan administrator for your self funded health insurance plan, or ask your accountant to suggest other plan administrators in your area.
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3
Convene a meeting including your human resources manager, your accountant, a representative of your payroll services company or plan administrator and your in-house accounting staff to clarify the responsibilities of each for administering your self funded health insurance plan. This includes handling transactions, providing information to employees and maintaining your employees' cash asset accounts
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4
Check with your accountant and plan administrator to determine the maximum limit that each of your employees may set aside each year in a self funded health insurance plan. Allow each employee to fund his own account through voluntary payroll deductions in any amount up to that ceiling.
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5
Create a written document, using a template that your receive from your plan administrator, that summarizes and explains the self funded health insurance plan to your employees. This document must spell out qualifying purposes for which funds may be disbursed, the period in which disbursements may be made for each calendar year and the maximum level at which an employee may fund the plan.
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6
Disburse cash to an employee from his self funded health insurance plan against receipts, documentation or requests for the qualified purposes allowed under your plan.
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Tips & Warnings
Some employers use the same structure and plan that they establish for self funded health insurance plans. This allows employees to fund their dependent care expenses.
Make sure that your employees understand that the fact that uninsured medical expenses are funded through their self funded health insurance plans does not automatically define them either as excludable from personal income or as deductible for tax purposes. Deductibility, for instance, may depend on whether an employee itemizes deductions and whether his medical costs meet the IRS threshold for medical expenses deductions.
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Comments
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mrvogel
Dec 03, 2008
This is NOT a good resource for learning about self-funding a health plan and a payroll administrator should NOT be a resource for this type of endeavour. Employers interested in self-funding a health plan need to understand the risks and responsibilities that come along with the potential rewards and should develop long-term strategic plans to best manage claims and health care dollars. The best resource for any employer interested in a self-funding arrangement is to work with a knowledgeable, experienced EMPLOYEE BENEFITS CONSULTANT. They will be able to advise on plan design and negotiate with service providers, stop-loss carriers and physician networks to insure effective coordination of all aspects of the self-funded plan. Any employer that attempts to use the above instructions will most likely end up with a plan that is costly and may ultimately put them out of business.
