QUESTION: Our firm is altering from an insured medical plan to a self-insured association. Ought to we create a plan doc, or ought to we use a doc from our TPA?
ANSWER: Your organization, because the plan sponsor, is liable for the content material and formal adoption of the ERISA-required written plan doc. You’ve these obligations whether or not the plan is insured or self-insured, however they’re extra vital with a self-insured well being plan as a result of the employer sometimes is financially liable for paying advantages and sometimes has a larger function in plan administration. As your query signifies, there are two normal approaches to getting ready a plan doc for a self-insured well being plan: (1) drafting a single doc that comprehensively units forth the plan’s provisions; or (2) utilizing a doc ready by the plan’s TPA, maybe together with a custom-made complement (or “wrap” doc) that units forth vital components not coated by the TPA’s doc. (The custom-made portion may additionally incorporate different well being and welfare advantages—insured or self-insured—that your organization gives, making a bundled plan.) In both case, you will need to work carefully with the plan’s TPA to know the TPA’s procedures and make sure that the plan’s provisions can be administered as supposed.
Key issues in deciding which method to make use of embody:
Design flexibility. Self-insured ERISA well being plans are afforded extra discretion in plan design than insured plans. As a result of ERISA preempts (supersedes) state regulation, the plan (not like insured plans) will not be required to adjust to state legal guidelines requiring protection of sure advantages or people. For instance, you might wish to exclude some companies that had been coated when the plan was insured, or slim the eligible beneficiaries (holding in thoughts, after all, that the plan should adjust to federal regulation). In case your plan design deviates from the TPA’s customary choices, a custom-made doc can be crucial.
Administrative and monetary issues. A plan design that adheres to one of many TPA’s customary choices could lead to decrease administrative charges than a design that requires specialised administration. Presumably, a plan doc out of your TPA will precisely replicate the TPA’s administrative practices, and it will likely be more cost effective to make use of than a custom-made plan doc. Nonetheless, it’s best to independently evaluation the TPA’s doc and be sure you perceive its provisions earlier than adopting it. And supplementation should still be wanted as a result of, as famous above, the TPA’s doc could not handle sure points of the plan.
Underneath both method, skilled advantages counsel—inner or exterior—must be concerned within the plan doc course of. Your organization, not the TPA, can be legally accountable if the plan doesn’t adjust to relevant authorized necessities. As well as, there are situations the place having explicit language in your plan doc, though not legally required, could make an important distinction when implementing plan provisions in courtroom—for instance, when defending a declare denial or implementing the plan’s subrogation and reimbursement rights. You must also ensure that your plan doc language is constant along with your abstract plan description and different participant communications. Additionally, if the corporate purchases stop-loss insurance coverage, the plan doc’s provisions have to be aligned as carefully as attainable with the stop-loss coverage, since variations could create monetary publicity for the corporate.
Lastly, the brand new doc have to be formally adopted in accordance with the authorization course of required below your organization’s governing paperwork and procedures (generally referred to collectively because the plan sponsor’s “advantages governance construction”). Make sure that the plan’s procedures are adopted—defective adoption may diminish the plan’s skill to implement plan provisions.
For extra data, see EBIA’s Self-Insured Health Plans guide at Sections III.F (“The Self-Insured Well being Plan Group: Roles and Tasks”), VIII.F (“Plan Governance for Self-Insured Well being Plans”) and IX (“Written Plan Doc”). See additionally EBIA’s ERISA Compliance guide at Part VIII (“Plan Design and the Written Doc Requirement”). You might also be excited about our webinar, “Self-Audit Your Group Health Plan Compliance” (recorded on 1/21/2021).
Contributing Editors: EBIA Employees.