Should your small business change to Self-Funded Insurance?

Double Digit increases are coming under Health Care Reform, or the inappropriately named “Affordable Care Act.”  There may be something you can do about it.

The issue is that, under community rating, your firm will pay the same price as everyone else, even if your group is young and healthy.  But what if you could prove your team is healthier?

If you have 25 or more employees, self-funded insurance may be the right way to go.  It is the only way to get a lower rate – but you have to PROVE your company is healthier than the norm.


Note-  There is a movement underway within the administration to try to take away this option for small businesses as well.  According to an article published in the Wall Street Journal on Thursday 9/12, “liberals” are trying to change the ERISA regulations which allow this, push state legislatures to ban stop-loss policies for small groups, and by other methods.


Here is how it works:

First, every eligible employee has to fill out a medical questionnaire – even if they are waiving coverage (Because they could come on later).  The insurance carrier will underwrite your group and give you a rate.  If it is better than the fully-insured rates, then you go ahead.

You will pay full premium throughout the year, and it will look and feel like “normal” insurance.  However, each month you will get a claims report, showing how much is being paid out by the company (using your money).  At the end of the year, if you have a balance in the claims account (usually you will) – you get some, or all, of that money back!

There are alot of technical little things you would have to get educated about, but it can work for you.