As brokers and consultants have beendeveloping strategies for their small- and medium-sized employersto prepare for the full implementation of the Patient Protectionand Affordable Care Act in 2014, there's been a growing interest inmoving these clients to self-funded health plans. While there hasalways been advantages to self-funding, PPACA has added to theattraction of self-funding through opportunities for greater costefficiencies and benefit plan design flexibility.

While self-funding is an increasingly attractive option forsmall and medium, it's almost always only a viable option ifaccompanied by the purchase of appropriate stop-loss coverage.Under a self-funded health plan, the employer is taking fullfinancial responsibility for funding that health plan, withunlimited liability for large claims beginning in 2014. Most smalland medium employers cannot reasonably assume such risk withoutspecific stop-loss to protect against individual catastrophicclaims and aggregate stop-loss to protect against an unexpectedamount of total claims in the year.

It might be tempting simply to send out requests for quotes to anumber of stop-loss insurance carriers, line the quotes up on aspreadsheet and choose the lowest price. The process mighteven move beyond the pure commodity approach to evaluation andconsider other factors such as experience of the stop-loss carrier,reputation for customer service and claims paying, cost containmentsupport and financial strength.

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