Why Smaller and Mid-size Employers are Considering Self-funding

Corporate Synergies discusses the importance of understanding the risks and potential rewards of self-funding your medical benefits.

By John Crable, Senior Vice President, Corporate Synergies

August 15, 2016

Historically, self-funding health insurance was an option that was more attractive to big employers, but that is changing. Self-funding – as opposed to buying insurance from a traditional fully insured carrier – has become a popular topic among small and medium sized employers. As with just about everything in healthcare these days, this is driven in large part by the Affordable Care Act.

The primary advantages of self-funding are the opportunity for cost savings and plan flexibility. Very simply, if an employer self-insures and claims come in under projections, the employer pays less for the coverage. With regard to the ACA, self-insured plans may not be subject to the Essential Health Benefit (EHB), community rating and medical loss ratio requirements. Additionally, self-funded plans avoid a portion of the health insurance tax that must be paid to traditional health insurers, as well as various state taxes. In total, the ACA taxes traditional plans at almost twice the rate of self-funded plans.

That said, when an employer decides to self-insure, it is making a bet. So what are the factors you should consider when deciding whether to make this wager…

Link to the remainder of the article: https://www.corpsyn.com/funding-alternatives/


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