8796 / What is a self-insured health plan?
A self-insured plan is one in which reimbursement of medical expenses is not provided under a policy of accident and health insurance.1 According to regulations, a plan underwritten by a cost-plus policy or a policy that, in effect, merely provides administrative or bookkeeping services is considered self-insured.2
An accident or health insurance policy may be an individual or a group policy issued by a licensed insurance company, or an arrangement in the nature of a prepaid health care plan regulated under federal or state law including an HMO. A plan will be found to be self-insured unless the policy involves shifting of risk to an unrelated third party.
A plan is not considered self-insured merely because prior claims experience is one factor in determining the premium.3 Further, a policy of a captive insurance company is not considered self-insurance if, for the plan year, premiums paid to a captive insurer by unrelated companies are equal to at least one-half of the total premiums received and the policy is similar to those sold to unrelated companies.4
Planning Point: Many stop loss insurance plans used in conjunction with self-insured health plans contain an actively at work clause. Employees who are not actively at work, yet who continue to participate in an employer’s plan, may find that their claims are denied. Employers should carefully review their health plan terms in light of COVID-19 trends where employers allowed employees to continue participating even while not actively working.
Withholding