One of the most important points in self-insurance is the fiduciary responsibility for the fund itself. Of course, the town is ultimately responsible for the cost of the fund. Self-funded insurance programs usually create a Board of Trustees to give oversight to the fund. This could be a combination of internal staff, employees, citizens, and outside experts and a liaison person from Council.
The Town of Oro Valley should establish a Board of Trustees. Their job would be to "mind the store."
The responsibilities of the Board of Trustees (Health Plan Trustees) would be to make policy decisions for the Health Plan and provide oversight of Plan activities.
The Board provides protection for the taxpayer by:
- determining the third party administrator (such as United Health Care) and other vendors that will work for or support the Plan on a fee for service basis;
- approving contracts with any health care vendors as a Health Plan Trustee;
- assuring that the third party administrator and other persons or vendors hired for administrative purposes carry out their duties in a professional manner (audit ability);
- approving any changes in benefits or rates proposed by third party administrator. (For example, a 7% premium increase has been included in the budget for both employee and employer contributions for FY14/15?);
- undertaking periodic reviews of the Plan's financial performance, funding safeguards, and stop-loss insurance protection and ensure adequate funds are available to pay for any Affordable Care Act (Obama Care) provisions or changes; and
- providing timely reports (monthly or quarterly) to the Council on the numbers of enrollees, claims experience, and the financial condition of the Plan
Both the employer and third party the administers the plan, that is reviews, approves and processes claims operate with no oversight, no regulation, and no accountability. In the self-funded plan, there is no insurer. United Health Care becomes the "Third Party Administrator." They process the claims, they administer the plan.
If the third party administrator (United Health Care) decides not to pay, the employee will not be able to use state laws or regulations to hold the Town of Oro Valley Employer or the third party administrator to accountable.
The only law that you have to back the employee up will be found on the Department of Labor website, under the "ERISA" section.
The Board provides this accountability for the employee. For example, the Board would create a claims review committee for purposes of reviewing the payment of claims that have been initially denied by the third party administrator.
The town has embarked on a treacherous road, self insuring what is really a small number of employees. The risk of doing this will not be seen for several more years as claims begin to mount. We think that a Board should also be put in place to provide oversight to the program, to measure its results, as well as to assure the employee and the taxpayer fair treatment for all.