Your company will self fund employee and dependant medical benefits up to your maximum claim liability under the aggregate stop loss reinsurance agreement. Claims administration will be handled in a conventional manner by JAD Benefits Solutions (JAD). JADS will assist you in arranging the reinsurance agreement between your company and the reinsurance carrier.
The schedule of benefits will actually be determined by you with assistance by JADS. Once agreed upon, JADS will establish a plan document and administer claims based on the parameters established. Claims are then processed by JADS, and funded by you as they emerge.
Your maximum claim liability factors are determined by the number of employees and dependents to be covered, geographical location, and the previous claims history of your group (if available). Once factors are established, your actual maximum claim liability can be projected for the ensuing plan year using estimates for enrollment, etc.
Aggregate stop loss coverage is provided should your maximum claim liability be reached in the plan year. Eligible claims exceeding this maximum are then reinsured by the reinsurance carrier up to a pre-determined maximum.
The specific stop loss coverage will lend stability to your plan by insuring that large individual catastrophic claims will not have a serious impact on your plan. After eligible claims reach the specific deductible in any covered benefit year, the specific stop loss reinsurance will reimburse you up to a pre-determined maximum, for an individual's eligible paid claims which have exceeded the specific deductible.
Claim funding varies from employer to employer. Some simply fund claims as they emerge, while others establish a trust under IRS code section 501 (c) (9) and deposit funds into the trust on a monthly basis at a pre-determined level (i.e. their maximum claim liability) and then withdraw funds as needed for claims. Funds deposited to such a trust cannot revert to the employer. Excess trust reserves usually can be used to offset future contributions or to pre-fund plan improvements.