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Self-insurance myths, busted


Are these myths keeping your groups from self-insuring?

Just because your clients’ group plan have always been fully-insured doesn’t mean this is still the best strategy for their organizations. While self-funding has traditionally been reserved for large groups, new solutions are available that make it possible for groups with even 20 employees to self-fund.

The big benefit of self-insurance is the savings potential. Because employers pay the claims, they reap the benefit of low-claim years. Additionally, there are also blended options, where employers can take on less risk and still benefit in low-claim years while minimizing risk in high-claim years.

But many small employers remain wary. Are these self-insurance myths keeping you or your clients from considering alternative funding methods?

These ideas commonly keep small employers from considering self-insured health plans, but they aren’t the roadblocks many employers think they are.

1. My company is too small

Self-funding plans require working with stop-loss carriers and third-party administrators to manage the plan. Traditionally, these vendors would not work with groups below a certain threshold. But with changing dynamics in healthcare, new options are available for groups as small as 15 to 20 lives, which opens up a variety of new options for small employers. Ask your broker if they can recommend vendors for a group your size.

2. We can’t sustain a bad month of claims. 

Plan administrators recognize that most small and mid-size employers would prefer a plan that is easier to budget. New plan structures minimize the risk of a high-claim month and make it easier for organizations to spread their costs over time. 

3. Employees won't fill out health questionnaires.

The administrative burden of having employees fill out health questionnaires can often be a deterrent for advisors and decision-makers alike. However, using a modern health questionnaire solution makes this process simple, and allows brokers to pursue every funding strategy available to a group.

4. We’ll lose our insurance network.

Many carriers with national networks are available through self-insurance plans, including Cigna and Aetna.

As fully insured plans becoming increasingly prohibitively expensive for small groups, brokers should be prepared to provide advice on self-insuring and other funding methods for groups of all sizes.

BerniePortal founder Alex Tolbert explained this trend in BenefitsPro:

"In prior years, it didn’t make sense for small employers to self-insure when fully-insured rates were competitive. But as costs continue to skyrocket, self-insurance is becoming a better option for many small employers, with some plans available for groups as small as 15 lives.

Unsustainable renewal rates will push more employers in this direction next year, especially as brokers and carriers find new and innovative ways to address self-insurance pain points. These concerns, like finding a provider network or maintaining cash flow for claims, have traditionally kept many groups fully-insured, but small employers may find the solutions to these issues more cost-effective than maintaining fully-insured rate increases."

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