Question 70

Employers can establish a self-funded/self-insured plan and hire a third-party administrator.

This option allows employers to retain control over their insurance coverage while outsourcing the administrative responsibilities to a specialized third-party administrator.

A) establish an individual policy for each employee

This option is not practical for employers seeking to provide coverage for multiple employees, as it can be administratively burdensome and costly. Individual policies do not allow for the pooling of risk and can lead to inconsistent coverage and higher expenses.

B) establish a fully insured, self-administered plan

While a fully insured plan is an option, it contradicts the premise of having no staff or expertise to manage the coverage. A self-administered plan requires significant administrative capabilities, which the employers in question do not possess.

C) establish a fully insured plan and hire a third-party administrator

Although this option allows for outsourcing administrative tasks, it does not align with the desire to establish a self-funded or self-insured approach. A fully insured plan shifts the financial risk to the insurer, which may not meet the employers' objectives of providing coverage while managing costs.

D) establish a self-funded/self-insured plan and hire a third-party administrator

This option effectively meets the needs of employers wanting to provide coverage without managing the administration themselves. By self-funding, employers can control costs and coverage, while hiring a third-party administrator ensures that the necessary expertise is available to manage the plan efficiently.

Conclusion

Option D is the most appropriate choice as it enables employers to maintain control over their insurance while outsourcing the administrative complexities. The other options either do not provide the necessary administrative support or do not align with the self-funding approach that the employers are seeking. Thus, establishing a self-funded/self-insured plan with a third-party administrator is the optimal solution.