January 1 to December 31.
Sometimes used by health insurance plans. This is the absolute maximum amount that the insurance company will pay on behalf of a health insurance participant within a given calendar year.
A contract provided to insureds or members of a group insurance plan which outlines the plan’s coverage and members’ rights. This document is what determines and defines the limits of a health plan’s coverage.
A demand made to the insurance company by an insured person or beneficiary for the payment of benefits under an insurance policy.
An insurance policy provision in which the insured and the insurance company share medical expenses in a specified ratio (e.g., 80/20) after the deductible is met.
This is the maximum amount paid under the coinsurance by an insured person. Deductibles and co-payments will still apply. Do not confuse this with the plan’s maximum out-of-pocket.
The amount of out-of-pocket expenses that must be paid for health services by the insured becoming payable by the insurer. It is usually less than a deductible and happens on a per-occurrence basis.
Benefits available to individuals under a health insurance plan. These benefits are subject to deductibles, coinsurance, and co-payments.
Warning! Plans with this type of hospital benefit could leave you with huge hospital bills. This is because these plans limit what they pay for your hospital expenses, and is often far short of the actual bills. A Daily Room Benefit is the maximum daily amount that an insurance company will pay for your hospital room and board.
The amount of out-of-pocket expenses that must be paid for health services by the insured before the insurance company pays anything. Deductibles can be based on a calendar-year or per-occurrence basis. Calendar-year deductibles allow for charges from multiple occurrences within a calendar year to be applied. Per-occurrence deductibles will be assessed for claims from each medical treatment occurrence
A benefit that allows a policyholder to receive a discount on prescription drug purchases. Generally, nothing is paid by an insurance company, so a policyholder could experience very large expenses for prescription purchases. This is a very important distinction from Drug (Prescription) Coverage.
Conditions or circumstances for which benefits are payable or excluded. Detailed information about limitations and exclusions can be found in the certificate of insurance.
This is the maximum amount an insured pays before the insurance company pays 100% of all future medical expenses for the rest of the calendar-year. Although a plan may indicate a maximum out-of-pocket, it typically does not include prescription co-payments. Generally speaking for non-HMO plans, co-payments of any kind and per-occurrence deductibles do not apply to the maximum-out-of-pocket.
The amount paid under coinsurance within a family plan that must be paid before the insurance company pays 100% of claims. It is usually a multiple of two or three times an individual’s coinsurance maximum.
The number of inpidual deductibles (or the total amount paid, which applies toward a deductible) that must be satisfied within a family health plan before the insurance company automatically begins paying for a medical claim. Most insurers limit this to a multiple of two or three times an inpidual’s deductible.
This is the absolute maximum amount that the insurance company will pay on behalf of a health insurance participant.
Doctors, hospitals, pharmacies, and medical facilities who have not signed a contract with your health insurance plan. These providers are permitted to charge more for their medical services. Insurance companies generally make policyholders pay more out-of-pocket (or sometimes all) of the expenses when these medical providers are used.
Doctors, hospitals, pharmacies and medical facilities that have signed a contract with your health insurance plan. These providers must accept discounted payments that were agreed to under their contract. Insurance companies generally provide more generous coverage if participating providers are used.
This is a reasonably close explanation of a health insurance plan’s benefits. This explanation should include limitations and exclusions of the benefits, or you may find some unpleasant surprises when you attempt to use your health plan. Anything that is unclear to you in the Plan Description should be clarified by consulting your certificate of insurance or by contacting your agent.
A physical and/or mental condition of an insured person that existed prior to the issuance of his or her policy. These conditions might not be covered by an insurance company. A policyholder should read the rules within his or her policy to help determine if benefits will be paid for a pre-existing condition.
  • Higher commission than a traditional fully-insured plan.
  • Usually lower premiums and Broker is more competative.
  • An Employer with a premium refund does not shop his insurance.
  • More control of your groups.

Fixed Cost:

1. Reinsurance premium for Specific (to cover any one claim over a specific amount i.e. $20,000, specific means if one    employee or dependent exceeds $20,000 in claims, the reinsurance carrier will pay for that claim up to the limit of the policy.)

2. Reinsurance premium for aggregate (substitute this for the words claims fund. The total of the amount an employer pays into the claims fund for the year for the entire group is the total or annual aggregate. If claims on the group as a whole exceed the maximum aggregate, the reinsurance carrier will cover the excess claims up to the maximum of the policy.)

3. Cash flow accommodation is available on some self insured plansand there is a cost added to the fix cost for this benefit. If there is a claim that exceeds the specific or aggregate maximum, the insurance carrier covers the excess immediately and the employer does not have to pay the excess claim and then have to wait for reimbursement from the reinsurance carrier. NEITHER GROUP HAD THIS FEATURE AND IT WAS NOT OFFERED OR EXPLAINED TO THE EMPLOYERS.

4. Run off protection. Employer can purchase this protection (IF IT IS OFFERD OR EXPLAINED WHICH APPARENTLY WAS NOT ON THESE TWO GROUPS.)  Self insurance plans have a 12/12 contract. This means claims incurred during the 12 month period of coverage and paid in that same period are covered by the aggregate and specific reinsurance. Claims incurred during the 12 month contract period but not received and paid by the last day of the 12 month contract is the complete responsibility of the employer. Thus employer truly self insures the run off claims. An employer may purchase a 12/15 or a 12/18 specific and or aggregate. This means that if a claim was incurred during the 12 month contract period but was submitted after the 12 month contract period and the claim was paid before the 15th month in a 12/15 contract or 18th month in a 12/18 contract after the 12 month contract period is covered by the reinsurance carrier. THE TWO GROUPS WERE SOLD 12/15 SPECIFIC CONTRACTS BUT HAD A 12/12 AGGREGATE CONTRACT. If an employer leaves the 12/12 or 12/15 contract during the 12 month policy year, there is no run off protrection. DUE TO THE CIRCUMSTANCES THESE TWO GROUPS WERE IN, THEY WERE FORCED TO LEAVE THE SELF INSURED PLANS MID YEAR AND HAD TO TAKE THE FULL RISK ON ALL RUNOFF CLAIMS.

5. Additional fees in the fixed cost are administrative fees, broker fees and sometimes other miscellaneous fess for services, etc.

Aggregate Cost:

1. This is a claims fund that the employer pays into on a monthly basisand is based on the number of employees and dependents insured with the group insurance plan. This is the amount the employer is put himself at risk with in the self insurance plan. The reinsurance in the fixed costpart of the plan is suppose to take care of any risk above the employers self insurance claim fund.

2. Minimum attachment point. This is the maximum risk the employer has in the annual aggregate (claims fund) exposure. This attachment point is based on the employee and dependent count the first month. If the employee or dependent count decreases during the contract year, the fixed cost can fluctuate (or it may not, depending on the contract purchased) with the employee and dependent count. The aggregate minimum attachment point on a self insured plan will stay the same for each month during the contract year, no matter how much the employee and dependent count drops. For example,  if the first month the enrolled employee count is 30 at a cost of $200 per [email protected] this equals $6,000 a month and $72,000 annual. Then if there are 10 dependent at a cost of $300 per month @ this equals $3,000 a month and $36,000 annual. When you add this up, the employer is liable for $108,000 annually in the self insured claims fund. If the employee count drops to 15 employees and 5 dependent units midway through the year, the employeris still liable for the annual minimum attachment point of $108,000. THIS WAS NOT EXPLAINED TO THE TWO EMPLOYERS. For a fee, some insurance carriers will let you purchase a variance on the minimum attachmentpoint. For example, if you purchase a 15% variance on the minimum attachment point, the employee and dependent count could decrease by 15% and the liability of the minimum attachment would decrease to 85% of the first month maximum aggregate. Any decrease more than a 15% reduction in employee and dependent count would become the liability of the employer. When you have a decreasing insured population on a self insured plan and the claims are meeting or exceeding the minimum attachment point, the employer has to make up the entire difference. ON THESE TWO CASES A VARIANCE WAS NOT AVAILABLE WITH THE PLAN SOLD AND WAS NOT EXPLAINED TO THE EMPLOYER.

With the two cases having a large dicline in insured employees and dependents and the claims being high, it was prudent for the emploers to frop the self insured plan and purchase a fully insured plan as soon as possible. This would decrease the liability of the employer. The added cost of paying the self insured plan to keep the reinsurance in place but moving the insured employees and dependents to a self insured plan gave the employer SOME NOT COMPLETE protection of the runoff claims. THE EMPLOYER INCURRED AN ADDITIONAL EXPENSE OF HAVING TWO PLANS OF INSURANCE IN PLACE BECAUSE THE MINIMUM ATTACHMENTS CLAUSE WAS IMPOSED ON THE EMPLOYER.

*** Leaving a self insured plan midyear releases the reinsurance carrier of any claims incurred that were incurred before the policy cancellation but received and or paid after the cancellation. This is the case even if the employer’s claims have not exceeded the minimum attachment point. ***

Spaggregate is an innovative self-funding approach that provides all the advantages of an ERISA plan with the payment and annual Guarantee Risk of a fully insured health benefit program.

Spaggregate offers:

  • An annual maximum plan cost.
  • Fixed monthly payments regardless of claim activity.
  • Plan design flexibility.
  • Other advantages of an ERISA self-funded program.
  • The opportunity to retain dollars if claim experience is exceptionally good.

The maximum plan cost and simple monthly payment approach of Spaggregate is guaranteed by the participation of an insurance carrier who provides stop-loss coverage.

During the course of the plan year, the employer’s monthly payments are used to fund a claim reserve and to pay premium to the stop-loss carrier. As claims are presented for payment, they are paid first from the claim reserve. If the reserve is inadequate to pay bills presented, the stop-loss carrier makes the payment. This bill payment procedure is seamless and requires no participation by the employer.

At the end of the plan year, if the claim reserve is not depleted by paid claims, any dollars left are retained by the employer. They can be applied to the cost of the next year’s Spaggregate Health Benefit Plan or used in any way to pay for or fund medical insurance programs or expenses for employees.

Spaggregate is calculated as a Self-Funded Plan but guaranteed for twelve months like an insured plan. There is no-stop-loss attachment point but the Carrier uses an internal pooling level just like in a fully insured quote. This operates like an Aggregate only and no stop loss per individual.

The contracts are typically a 12/12 with a terminal liability option or a 12/18.

Spaggregate works just as a fully insured program will work. The Employer funds the full billed premium amount monthly and that is his/her only exposure. If the group runs very well and at the end of the contract term there are monies left to pay claims in the Trust that money belongs to the Plan and not the Carrier, as it would in a fully insured funding method.

Advantages of Spaggregate:

  • Elimination of Most Premium Tax:  There is no premium tax for the self-insured claim fund. Premium tax is applied only to the Stop-Loss premium, which is significantly less than a fully insured plan.
  • Lower Cost of Operation: Employers frequently find that administrative costs for a selfinsured program administered through a TPA are lower than those charged by a full-service insurance carrier.
  • Carrier Profit Margin and Risk Charge Eliminated: The profit margin and risk charge of an insurance carrier are eliminated for the bulk of the plan.
  • Effective Claim Management: TPAs are evaluated on their ability to provide fast, efficient claims service as well as appropriate management of claims to reduce the employer’s cost. Aegis Administrative Services, Inc. accomplishes this with it’s modern up to date systems.
  • Control of Plan Design: The employer has complete flexibility in determining the appropriate plan design to meet the needs of the employees. The employer can design the plan to eliminate plan abuses if they are encountered.
  • Mandatory Benefits are Avoided: State regulations mandating costly benefits are avoided because self-funding is regulated by federal legislation.
  • Administration Tailored to the Employer’s Needs: With Aegis, the Employer has the flexibility to dictate the services needed for their program.
  • Risk Management Effectiveness Through Stop Loss Insurance: The Employer may choose the amount of risk to retain and the amount to be covered by Stop Loss coverage.

CLAIM FUNDING AND PAYMENT

The maximum plan cost and simple monthly payment approach of Spaggregate is guaranteed by the participation of an insurance carrier who provides stop-loss coverage.

  • During the course of the plan year, the employer’s monthly payments are used to fund a claim reserve and to pay premium to the stop-loss carrier.
  • As claims are presented for payment, they are paid first from the claim reserve.
  • If the reserve is inadequate to pay bills presented, the stoploss carrier makes the payment.
  • This bill payment procedure is seamless and requires no participation by the Employer.

At the end of the plan year, if the claim reserve is not depleted by paid claims, any dollars left are retained by the Employer. They can be applied to the cost of the next year’s Spaggregate Health Benefit Plan or used in any way to pay for or fund medical insurance programs or expenses for employees.

BREAKDOWN OF MONTHLY PREMIUM PAID BY EMPLOYER

Monthly premium paid by Employer (Example) $25,000.00 is paid into a Trust Account and it is distributed as follows:

  • $12,000.00 is set a side for claim funding each month.
  • $8,000.00 is premium to Stop-Loss Carrier
  • $5,000.00 is paid to TPA, PPO,UR, and all other Vendors.

First month there are $10,000.00 of claims presented. This amount is taken out of the Claim Funding account leaving a balance of $2,000.00.

Second month same distribution and claims presented are $20,000.00. $12,000.00 is put into the Claim Funding account plus the $2,000.00 carry over with a deficiency of $6,000.00. The Stop-Loss Carrier pays the $6,000.00.