Oct. 17, 2012

Editor’s Note: This is Web-only bonus coverage from “Is Self-Funding Right for You?” in the October 2012 issue of CUES’Credit Union Management.

For some credit unions, self-funding health care can be a real positive, in terms of lower costs and great benefits. But there are risks, one of which is compliance-related.

“If you’re self insured, you are regulated primarily under the Employee Retirement Income Security Act, or ERISA,” says Michael W. Ferguson, chief operating officer of the Self-Insurance Institute of America, Inc., Simpsonville, S.C. It’s important to understand the requirements that exist under ERISA about operating health plans, such as fiduciary responsibilities and a mandate to run the plan in the best interest of the participants, not the employer.

“For companies considering self insurance, it’s very important that they consult with an ERISA attorney to make sure they set up the plan so they’re in compliance, and that they maintain that compliance on an ongoing basis,” Ferguson says.

Information in the marketplace sometimes implies that self insurers are dodging regulations, but Ferguson says the opposite is true. “They’re actually retaining more liabilities, legal and otherwise, than if they were in the fully insured marketplace,” he says. And while Ferguson doesn’t want to scare companies away from self-funding, he says it isn’t a decision that should be entered into lightly. “It requires a good amount of due diligence to make sure they’re doing it correctly,” he says.

Julie Knudson is a freelance writer and owner of Olympic Bay Media, Inc., Arlington, Wash.