While fully insured group health insurance plans are regulated by states, there are some federal regulations that must be followed by the various group health plans. These include the ACA, COBRA, HIPAA and ERISA.
Each state in the United States of America has a department that looks after insurance related issues. Usually the state department that looks after insurance has the entire authority over the following:
- How business is conducted by the insurance industry within a particular state
- Issuance of licenses and regulation of the practices as well as the rates of brokers
- Insurance companies and agents in the state
Functions of a health insurance company
A health insurance company or an insurer insures most of the employer group health insurance plans. In other words, it denotes that an employer has to enter into an agreement with a health insurance company. This is to provide health-related benefits to its eligible employees and make payment for premiums for availing such coverage. An insurer on the other hand assumes all risks related to the claims. The states assume responsibility for fully ensured group health plans. Implementation of the new Affordable Care Act gives more power to the federal government over larger group health insurance plans than ever before. The Affordable Care Act has laid down all the relevant provisions that range from waiting periods of the employees before the commencement of coverage to different types of preventive services that should be offered by a group health plan.
Self insurance and self funding
But, larger group plans meant for hundreds of employees may also opt for partial or full self-insurance. This is as a part of their group benefit plans. This process of group insurance is also known as self-funding. It denotes that the employer would not pay premium for health insurance coverage to a health insurance company. However, it will set aside a pull of reserve funds and would be responsible for health benefit claims risk.
Companies that opt for the self-insure option usually purchase what is referred to as a stop-loss insurance policy. It can protect the assets of the employer against losses that are above a specific threshold limit. Such employers also enter into an agreement with a health plan or a 3rd party administrator for handling and administering health related claims.
Often several employees in organizations that choose the self-fund coverage are not even aware that their health-plan is being self-funded by their own employers. Self-funding is regulated by the Department of Labor in the federal government under ERISA or the Employee Retirement Income Security Act of 1974. Thus, at times they are also referred to as ERISA plans. In case employees are not certain about whether they are covered by fully insured or self-funded plans, it is always better to ask their employers about it.
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Rodger S. Kamuf is registered with and offer securities through Kovack Securities, Inc. Member FINRA/SIPC. 6451 North Federal Hwy, Suite 1201, Ft. Lauderdale, FL 33308 (954)782-4771. Advisory Services offered through Kovack Advisors, Inc. a SEC registered investment advisory firm. RK Asset Management LLC is not affiliated with Kovack Securities, Inc. or Kovack Advisors, Inc. Registered Representative may only conduct business with residents of the states and/or jurisdiction for which they are properly registered. Linked sites are strictly provided as a courtesy. Kovack Securities, Inc. does not guarantee, approve nor endorse the information or products available at the sites, nor do links indicate any association with or endorsement of the linked sites by Kovack Securities, Inc. nor Kovack Advisors, Inc.