Self-insured medical plans
Normal Insurance Plans
In order to understand how a self-insured medical plan works, it is necessary to understand how many businesses normally conduct health care for their employees. In an average-size business (or for someone who is self-employed), health care is managed by a separate insurance entity, a company that contracts with the business and offers rates and plans based on that contract, available to all employees. Employees choose a plan, and the employers pay a certain amount out of their paychecks to the insurance company to cover the premium for their insurance. These plans are limited based on the options the insurance company gives.
Self-Insured Plans
Self-insured plans, on the other hand, are paid for by the company itself. Instead of making a contract with an insurance company, the business acts directly with the medical industry itself, paying for operations, procedures and similar expenses. Of course, this requires a very large company to afford to create plans for their employees and offer medical coverage apart from an insurance company. These corporations must also be very highly organized in order to offer their own versions of plans to employees and manage the individual premiums.
TPAs
Since using a self-insured medical plan can be a lot of work, even for a large corporation, most businesses who offer them use a TPA, or a third-party administrator, to handle the details of the plans. This can become confusing because of the different roles involved. The TPA works on the clerical side of the medical plans, keeping track of what plans are offered, what employees have chosen which plans and all premiums and claims being processed by the business. The corporation itself acts like the insurance company, making decisions concerning claims and benefits. However, the TPA may be an insurance company, even though they do not make any real insurance decisions.
Tags: insurance company, health care, medical plan, self-insured medical, self-insured medical plan, their employees