Self-administering, Insuring and Funding Benefit Plans

Offering life, health, and disability benefits to employees used to be simple. Employers would receive proposals and select from a number of insurance companies. Except for a few administrative details, the insurance companies would do the rest.

Those days are gone. Now, when employers decide to offer life, health and disability benefits to their employees, they are presented with an array of alternatives, including self-administration, self-funding and self-insurance through captive insurance companies. As a practical matter, it can be difficult to understand these alternatives, compare them, decide among them, and, ultimately, manage the one that is selected. As a legal matter, it is important to appreciate that each alternative carries a different set of legal obligations, exposures and challenges, and is governed by a different combination of private contracts, state and federal laws and state and federal regulations.

This chapter illustrates the various advantages and disadvantages of each of these alternatives, provide information relevant to contract negotiation and evaluation, and provide guidance as to the handling of various types of issues that may arise.