CARD T214
Self-Funded Health Plan
A plan in which the sponsor bears claim costs rather than buying full insurance for those costs. An insurer may still administer claims.
How it works
In a self-funded health plan, the employer or sponsor bears covered claim costs instead of transferring all of that risk to a health insurer. It may hire an insurer or third-party administrator for processing and network access. Stop-loss insurance can limit sponsor exposure without replacing participant coverage. Many private employer self-funded plans are governed by ERISA; governmental and church plans can follow different rules. [10] [17]
An insurance company’s name appears on the ID card because it administers claims, but the employer funds covered payments.
The name on the ID card does not by itself prove the plan is fully insured.
CARD T215
Stop-Loss Insurance
Insurance limiting specified claim exposure of a self-funded plan sponsor. It protects the sponsor under its terms rather than replacing participants’ health coverage.
How it works
Stop-loss insurance reimburses a self-funded employer for covered claims above a stated threshold, called an attachment point. Specific stop-loss applies to one person’s claims; aggregate stop-loss applies to the group’s total claims. For example, a $100,000 specific threshold leaves the employer responsible for the first $100,000 of eligible claims for one person, with the stop-loss insurer covering eligible amounts above it under the contract. This protects the employer’s finances. The employer remains responsible for employee benefits under the health plan, even if a stop-loss payment is disputed. [10] [17]
With a simplified $100,000 specific attachment point and $140,000 eligible paid claims for one person, stop-loss reimbursement is $40,000 before other terms.
Stop-loss protects the sponsor; it is not a replacement individual health policy for the employee.
CARD T216
Contributory Group Plan
Group coverage for which members pay part of the premium. Employees may contribute through payroll deductions.
How it works
In a contributory group plan, covered members pay part of the premium, often through payroll deductions, while the sponsor pays the remainder. Participation requirements can apply. Many traditional group-life exam examples use a 75% participation requirement for eligible employees in a contributory plan, but this is not a universal rule for every group health product or jurisdiction. [10] [17]
A $500 monthly premium is split $350 employer and $150 employee. This is contributory coverage.
Premium contribution is different from paying a deductible or copay after a claim.
CARD T217
Noncontributory Group Plan
Group coverage whose premium is paid entirely by the sponsor. Covered employees do not contribute to that premium.
How it works
A noncontributory group plan has the sponsor pay the entire premium for the stated coverage. Members can still owe deductibles, copays, or coinsurance; employer-paid premium does not mean all care is free. Traditional group-life underwriting commonly expects all eligible members to participate in employer-paid coverage, subject to applicable rules and exceptions. [10] [17]
An employer pays the full employee coverage premium, while employees still owe the plan’s office-visit copays.
Noncontributory concerns premiums, not necessarily claim cost sharing.
APPLY THE TERMS
Practice questions
Select an answer, then check it to see why each option is right or wrong.
T214 · Self-Funded Health Plan
0 of 3 answered
T215 · Stop-Loss Insurance
0 of 3 answered
T216 · Contributory Group Plan
0 of 3 answered
T217 · Noncontributory Group Plan
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Sources & further reading
Original explanations and practice scenarios informed by the following regulatory, legal, and product resources. State examples are not presented as nationwide deadlines or requirements.