Mutual Insurance

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Health Freedom - Mutual Insurance
Mutual Health Insurance Group Health Plans




Q. What is a Mutual Health Insurance plan?
A. A Mutual Health Insurance group health plan (or a 'self-funded' plan as it is also called) is one in which the a group of like minded individuals assumes the financial risk for providing health care benefits to its members. In practical terms, Mutual Health Insurance pays for each out of pocket claim as they are incurred instead of paying a fixed premium to an insurance carrier, which is known as a fully-insured plan. Typically, a Mutual Health Insurance Organization will set up a trust fund to earmark money to pay incurred claims during the course of the year. If claim payments are less than the funds (premiums paid in) the following year premiums could go down or remain flat. The financial results is dependent on the age, sex, injury and illness patterns; not on an abstract actuarial result that does not take into account the specific needs of the mutual’s members. The plan is to make medicine personal and distinct for the individual (patient centric).

Q. How many people receive coverage through Mutual Health Insurance health plans?
A. According to a 2000 report by the Employee Benefit Research Institute (EBRI), approximately 50 million workers and their dependents receive benefits through Mutual Health Insurance group health plans sponsored by their companies. This represents 33% of the 150 million total participants in private employment-based plans nationwide. Our plans will expand that number to included everyone in the nation.

Q. Why do Mutuals self fund their health plans?
A. There are several reasons why Mutuals choose the self-insurance option to operate. The following are the most common reasons:
1. The Mutual can customize the plan to meet the specific health care needs of its workforce, as opposed to purchasing a 'one-size-fits-all' insurance policy.
2. The Mutual maintains control over the health plan reserves, enabling maximization of interest income - income that would be otherwise generated by an insurance carrier through the investment of premium dollars.
3. The Mutual does not have to pre-pay for coverage, thereby providing for improved cash flow.
4. The Mutual is not subject to conflicting state health insurance regulations/benefit mandates, as Mutual Health Insurance health plans are regulated under federal law (ERISA).
5. The Mutual is not subject to state health insurance premium taxes, which are generally 2-3 percent of the premium's dollar value.
6. The Mutual is free to contract with the providers or provider network best suited to meet the health care needs of its employees.

Q. Is self-insurance the best option for every Mutual?
A. No. Since a Mutual Health Insurance Mutual assumes the risk for paying the health care claim costs for its members, it must have the financial resources (cash flow) to meet this obligation, which can be unpredictable. Therefore, small Mutuals and other Mutuals with poor cash flow may find that internal self funding is not a viable option. It should be noted, however, that there are companies with as few as 25 member organizations that do maintain viable Mutual Health Insurance health plans.  (This is why PAYE is essential to providing what you need.)

Q. Can Mutual Health Insurance Mutuals protect themselves against unpredicted or catastrophic claims?
A. Yes. While the largest Mutuals have sufficient financial reserves to cover virtually any amount of health care costs, most Mutual Health Insurance Mutuals purchase what is known as stop-loss insurance to reimburse them for claims above a specified dollar level. This is an insurance contract between the stop-loss carrier and the Mutual, and is not deemed to be a health insurance policy covering individual plan participants.

Q. Who administers claims for Mutual Health Insurance group health plans? 
A. Mutual Health Insurance Mutuals can either administer the claims in-house, or subcontract this service to a third party administrator (TPA). TPAs can also help Mutuals set up their Mutual Health Insurance group health plans and coordinate stop-loss insurance coverage, provider network contracts and utilization review services.

Q. What about payroll deductions?
A. Any payments made by employees and other members for their coverage are still handled through the Mutual' s payroll and automatic bank deposit withdrawal department. However, instead of being sent to an insurance company for premiums, the contributions are held by the Mutual until such time as claims become due and payable; or, if being used as reserves, put in a tax-free trust that is controlled by the Mutual ( the Mutual’s Members).

Q. With what laws must Mutual Health Insurance group health plans comply?
A. Mutual Health Insurance group health plans come under all applicable federal laws, including the Employee Retirement Income Security Act (ERISA), Health Insurance Portability and Accountability Act (HIPAA), Consolidated Omnibus Budget Reconciliation Act (COBRA), the Americans with Disabilities Act (ADA), the Pregnancy Discrimination Act, the Age Discrimination in Employment Act, the Civil Rights Act, and various budget reconciliation acts such as Tax Equity and Fiscal Responsibility Act (TEFRA), Deficit Reduction Act (DEFRA), and Economic Recovery Tax Act (ERTA).