Self Funded Plans

8-28-2008

Specific Deductible: The attachment point of the Reinsurance is expressed as a deductible. When the claims for an individual exceed the deductible, the reinsurance attaches and the employer is reimbursed 100% of the claims paid above the deductible during the contract period.

12/12 Basis: Claims incurred and paid during a 12-month period. An 18/18 is expressed as covering claims incurred and paid during an 18-month period for an individual claimant.

Aggregate Stop-Loss: An aggregate stop-loss contract covers all claims that are less than the specific deductible. The basis is normally the same as a 12/12 or 18/18. Best described as "sleep easy" coverage, with a low cost, the expected claims are multiplied by 125% to calculate the claims attachment point. If claims exceed the attachment point during the contract period, the employer is reimbursed at 100% for claims amounts that exceed the attachment. The attachment is calculated monthly.

Fixed Cost: The cost for administration and reinsurance. No claims costs are included. The fixed cost is not a variable.

Expected Funding Rates: When an aggregate stop-loss is purchased the funding levels for claims plus the fixed cost is established.

Maximum Funding Rates: The maximum funding rate is the expected claims cost times 125%, plus the fixed cost. This represents the maximum cost for the employer in a "worst case" projection.

Suggested Funding Levels: Based on projections and assumptions using the expected cost as guidelines, the monthly cost factors are developed for payroll and COBRA rates.

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