Every company that self-insures its employee benefits will face a choice of whether to outsource its administration to a third party administrator, enter into an Administrative Services Only arrangement with an insurance company, or perform its own administration. There are pros and cons for each. Ultimately the decision depends on the self-insurer's long-term objectives, its size and expertise, as well as its access to outside service providers such as third party administrators and cost allocation resources.   

Outsourcing of Administration

The size of a company, as well as its level of expertise, will be an important issue in deciding whether to self-administer a plan. Self-administration not only requires developing in-house expertise but also ensuring that systems are capable of administering the program. Stop-loss insurers will need to be convinced that the administrator is working to reduce costs and this may not always be the case when self-administering claims. 

If a company is not willing to allocate internal resources to implementing IT systems, training programs and staffing then using the services of a Third Party Administrator or alternatively an ASO arrangement becomes more attractive.  

Appointing a Third Party Administrator

A self-insured employer that chooses to hire an outside administrator will need to ensure that a local third party administrator is available to administer the plan. When selecting a third party administrator (TPA), the following need to be considered:

• The TPA’s ability to administer the program efficiently.

• The TPA’s contacts with other service providers such as stop-loss carriers and managed care organisations.

• The TPA’s ability to control costs and provide an efficient service to employees and their families. 

Also in this section

Initial Considerations for Self-Insuring Employee Benefit Trusts
Administering a Self-Insured Employee Benefits Trust
How Self-Insured Employee Benefits Stop-Loss Insurance works
Selecting an Employee Benefits Trust Stop-Loss Provider
Self-Insured Employee Benefits In The USA - How The ERISA Act of 1974 Works