Partially self-funded and hybrid health plans.
Self-funding does not have to be all or nothing. Many employers fund one part of the plan themselves and insure the rest, or keep their risk low with a high stop-loss cushion. Here is how the common hybrids are built.
The ways a plan can be partly self-funded.
Self-Funded Medical, Insured Ancillaries
The employer self-funds medical and keeps dental, vision and life fully insured. Each line is its own contract and its own risk.
Self-Funded With a Low Attachment Point
A low specific deductible and a tight aggregate keep the employer’s risk small. It behaves like insurance while keeping the data and some of the upside.
Carve-Outs
The employer self-funds one benefit, such as pharmacy, while the rest of the plan stays insured. The carved-out piece has its own vendor and contract.
Different Funding by Class
Some employers use different plans or funding for different employee groups, subject to nondiscrimination rules for self-insured plans.
Group Captives
Smaller employers can pool risk with others in a group captive, which spreads claims across members. CFH places group health captives.
A Step on the Way
Many hybrids are a first stage. An employer starts with a low-risk design and takes on more risk once reserves and experience are in place.
What you gain and what you take on.
The right hybrid depends on which risk you want and which you would rather leave with a carrier.
More Control Over the Biggest Costs
Self-funding medical or pharmacy puts control over the largest cost drivers in your hands, but only if you manage them.
Several Contracts to Manage
Each funded or insured line has its own contract, renewal and vendor. A hybrid is more to coordinate than one insured plan.
Risk Is Split, Not Gone
The part you self-fund carries claims risk. Size the stop-loss and cash reserves to that part only.
Nondiscrimination Still Applies
Self-insured medical plans must meet the nondiscrimination rules for self-insured plans, which restrict favoring highly compensated individuals.
Reporting Can Differ by Line
Filing and reporting duties can differ between the self-funded and insured portions. We map each line before it starts.
Pricing Is Easier to Compare Line by Line
You can price each line separately and move one without disturbing the others.
How we design a hybrid.
Start With the Risk You Want
We ask which cost you most want to control, and which risk you least want to hold, then design from there.
Price the Pieces Together and Apart
We compare the hybrid to a fully insured plan and to a full self-funded plan on the same census.
Plan the Compliance Map
We list the plan documents, notices and filings for each piece, so nothing is missed between contracts.
Three questions to settle.
Which Risk Are We Keeping?
Name the claims and the dollar range you will fund, and the point where someone else takes over.
How Do the Contracts Fit Together?
Ask whether terms, effective dates and renewals line up, and who is accountable for each piece.
What Would We Change Next Year?
Decide in advance what result would make you take on more risk, or less.
Common Questions About Hybrid Plans
Is a partially self-funded plan still subject to ERISA?
Yes. An employer plan that provides medical benefits is generally subject to ERISA whether it is insured, self-funded or a mix.
Can we self-fund pharmacy only?
Some employers do, using a carve-out arrangement with a pharmacy benefit vendor. We review the contract carefully, because the details drive the results.
Does a hybrid reduce risk?
It can, if the self-funded portion is small or well protected. It also adds complexity. We weigh both.
Do we need a plan document for a hybrid?
Yes. A written plan document is required, and it should describe each piece of the plan accurately.
Does CFH place group captives?
Yes. A group captive is one of the funding options we place, alongside fully insured, level-funded and self-funded plans with stop-loss.
Can we change the mix later?
Generally at renewal. Some changes need notice periods, so we plan them early.
Send us your renewal.
We’ll tell you whether it looks competitive, where we see opportunity, and the five questions we’d put to your carrier. No cost, and no obligation to move anything.
The renewal letter
Your current plan summary
Contribution split by tier
Enrolled counts by tier
Four documents — two more if your group is 50 or more. Nothing else; every extra one is a reason to postpone.
Laws and rules referenced
29 U.S.C. § 1003 — ERISA coverage of employee welfare benefit plans.
29 U.S.C. § 1102 — Written plan instrument required.
26 U.S.C. § 105(h) — Nondiscrimination rules for self-insured medical reimbursement plans.
This page is general information, not legal, tax or actuarial advice. Rules change and facts matter, so confirm your situation with counsel or a qualified advisor.
An independent employee benefits consulting firm. We look at the entire benefits program: cost, plan performance, risk and administration.
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