Disadvantages of Self Funding

Acknowledged claim experience:

  • NMSU would be funding actual claims versus paying a monthly known “rate” – with the potential for liability up to the first $200K (if that is where the stop loss deductible is set)
  • Worse than average claim experience could cause higher costs
  • There could be monthly fluctuations in claims/plan costs

Budgeting the program:

  • Monthly fluctuation of cash flow, unless reinsurer will provide monthly cap
  • Devise a method of anticipating monthly expenditures
  • Need to have funds available to pay large claims prior to stop loss reimbursement (not necessarily depending on carrier)
  • Setting up reserves

Increased employer involvement:

  • Verifying eligibility
  • Maintaining banking arrangements
  • Client bears responsibility for Legislative Compliance (i.e., HIPAA – the NMSU plan would be the Covered Entity, not the carriers)
  • Would require changes to policies and procedures
  • Increased fiduciary liability
  • Responsible for writing, maintaining, producing plan documents, Summary Plan Descriptions, etc.