The Financial Model
When choosing a means to provide employee benefits, your options basically fall into one of two categories: fully insured or self-funded. CEBCO is a self-funded purchasing pool that offers many of the advantages of self-funding with an added level of predictability for you as a member county. For budgeting purposes, it works like a fully insured product:
- You pay CEBCO a set amount each month for 12 months at a time.
- CEBCO pays all of your claims on your behalf.
Each county has a “pooling point” based on size. Your pooling point could be anywhere between $75,000 and $175,000. Your claims are attributed to your experience when you are being rated for the coming year, but only those claims below your pooling point. This is because any claims that exceed that level are paid from a larger pool that is shared by all counties. This form of pooling gives you the best of both worlds: you are protected from very large claims, and you get the benefit of those things that you do to manage your claims at the lower levels – things like wellness programs and consumer-driven plan designs.
CEBCO purchases stop-loss insurance – much like you might be doing today if you are self-insured – for any claims that exceed $500,000. As a result, the larger pool is also protected for the good of all. You are protected and the pool is protected, each within their respective abilities to sustain a loss.
Here is something that distinguishes CEBCO from other means of self-funding – if you leave CEBCO, you have no claims run-out to pay. In order to maintain stability, CEBCO participation requires a three-year commitment. If you stay through your participation period, after the 36th monthly payment CEBCO pays all claims incurred during that period. This is not true with most other self-insured arrangements.