Most businesses have been forced to analyze their benefit packages as the cost of health insurance rises. Some have even considered eliminating health insurance completely from employee benefit’s package. But for some companies there is another option that at one time was only used by large companies — self-insurance.
Self-insurance or self-funding has recently seen a rise in popularity among small and mid-size businesses. According to a 2000 report by the Employee Benefit Research Institute, approximately 50 million workers and their dependants receive benefits through self-insured group health plans. That number represents 33 percent of the total participants in private employment-based plans nationwide.
Even though the idea is to save money in the end, businesses do assume some risk with self-insurance and because the employer assumes the risk of paying health care claims, overall cash flow can be an issue. But as Donna Luby, president of Self-Funded Plans (SFI) in Cleveland, a third part administrator for employee benefit plans explains, “When the dollar gets a little tighter, the employer is sometimes willing to take on a new risk.”
Despite the risk, self-insurance has become an increasingly attractive alternative for many new, growing companies that have the right demographics. The right demographic usually means unmarried, under 30 years and relatively physically active.
Recent statistics indicate a young, unmarried workforce means fewer claims and lower health costs.
In the case that life-threatening illness occurs, such as open-heart surgery or cancer, Luby says businesses that self-insure should not be totally liable. Self-insured companies should buy something called to catastrophic insurance that takes over when employee claims surpasses a specific dollar amount.
One of the reason some employer are looking to self-insurance is that many young healthy companies feel they are paying for others and not realizing the benefit of their good health. “If you have a very good year with a fully insured product, the money goes to the insurer,” says Luby.
How to reach: Self-Funded Plans Inc., (216) 566-1505 or www.medillume.com/sfpi.htm
