Excess Risk Insurance
The appeal of a self-funded benefit plan is derived from the financial advantages it offers. These include improved cash flow, elimination of premium taxes and freedom to invest funds.
There are, however, risks involved in this approach. Increased utilization, inflation and other factors can lead to unacceptable overall plan costs while catastrophic claims can create a “shock loss” which you are not prepared to handle.
The self-funded benefit plan sponsor can purchase Excess Risk Insurance to help stabilize cash flow and protect against extreme fluctuations in paid claim levels.
Individual Excess Risk Insurance shields against the threat of shock loss by limiting the claim liability with respect to any one Plan participant. It provides prompt reimbursement if claims exceed a specified per participant, all cause deductible amount.
On a per participant basis, if claims reach the deductible amount during the policy year, the Excess Risk carrier will promptly begin reimbursing you for any further loss incurred on behalf of the individual. Repayment will continue throughout the policy year subject to the maximums indicated in the proposal.
In addition to Individual Excess Risk Insurance, the self-insured employer can purchase Aggregate Excess Risk Insurance to protect against unusual fluctuations in claim frequency or severity. When the annual claim limit for all participants exceeds a predetermined level, Aggregate Excess Risk Insurance reimburses the self-insured employer for all claims incurred and paid during the agreement year that exceed the predetermined level.