Difficulty: Easy

Average Score: 100%

Some employers want to provide their own coverage but do not have the staff or expertise to administer the coverage. What option is available?

Rationale

Establish a self-funded/self-insured plan and hire a third-party administrator.

Employers lacking the necessary staff or expertise can opt for a self-funded or self-insured plan, which allows them to retain more control over their coverage while outsourcing the administrative tasks to a third-party administrator (TPA). This approach combines cost savings with professional management of the health plans.

A (establish an individual policy for each employee) YOUR ANSWER

Creating individual policies for each employee could lead to significant administrative burdens and increased costs. It is inefficient for employers, as managing multiple individual policies would require extensive resources and expertise that many do not possess, rather than providing a streamlined coverage option for all employees.

B (establish a fully insured, self-administered plan) YOUR ANSWER

A fully insured plan is managed by an insurance carrier, which contradicts the idea of self-administration. If an employer chooses this route, they would not be handling the coverage themselves, nor would they be leveraging the benefits of self-funding. Therefore, this option does not align with the employer's need for administrative support.

C (establish a fully insured plan and hire a third-party administrator) YOUR ANSWER

While hiring a TPA to manage a fully insured plan could ease administrative burdens, it does not address the employer's desire to provide their own coverage. A fully insured plan transfers the risk to the insurance company, which does not align with the self-funding model that allows for greater flexibility and cost control.

Conclusion

For employers wanting to maintain control over their health coverage while lacking the necessary resources for administration, establishing a self-funded/self-insured plan with a third-party administrator is the most viable option. This strategy provides the dual benefit of cost efficiency and expert management, allowing employers to focus on their core business operations while effectively managing employee health benefits.

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