Posted on Monday, 16th August 2010 by Vanessa Miller
If you’re having trouble meeting your expensive insurance premiums and you’re not sure how healthcare reform is going to affect your business, there’s another option to consider, and one that you can take advantage of right now—self-insurance. Usually used by larger companies with more than 1,000 
employees, the advantages might be right for some smaller companies.
Here’s how the self-insurance method works: Instead of paying monthly premiums to an insurance company, your company pays directly for any employee medical claims. You can also build a deductible or co-pay into your plan, so your employees are responsible for some of the costs. Most companies outsource some of their insurance services to an outside company for help with enrollment, claims processing, and other administration responsibilities, but these can also be done in-house, saving you even more money. You’ll also save by avoiding state taxes and other costs that insurers usually pass on to you.
Self-insurance is possible for any insurable risk, meaning a predictable risk that you can estimate the amount needed to be set aside for future losses. Many companies that self-insure design a plan that will fit with their employees’ needs. For example, if your employees fit a certain age group or gender, you can tailor your coverage to fit their needs. It’s also wise to get stop-loss insurance (which covers claims above a certain dollar amount and below a certain limit, so you can “cap” your costs). For example, you can offer to pay up to $10,000 of employees’ medical claims. Stop-loss insurance would then cover anything over $10,001.
So how do you decide whether this is the right option for your business? Being self-insured means you don’t have to comply with state mandates for health insurance plans and you can customize coverage as you see fit. However, unlike paying a set premium every month, you won’t know what you’ll end up paying out in claims. Calculate the difference in your costs by comparing what you’ve paid in premiums over a certain amount of time versus what it would have cost you if you had been self-insured. Even with expensive claims from health services such as obstetrics and oncology, you may still save money by not paying high premiums.
For more information, check the Self Insurance Institute of America.
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