But the self-funded insurance gamble once reserved for large organizations is appearing more lucrative to small and mid-size employers, many of whom will probably sign on next year to try throttling higher costs under the federal Affordable Care Act, benefits consultants say. An announcement last month that the
"There's a definite subset savings of money when you go self-funded. That's clear," said
He estimated some companies might shave more than 10 percent from projected health insurance expenses by choosing the self-funded approach -- in which they cover medical claims themselves -- instead of a fully insured set-up. The fully insured method leaves the bulk of risk with health insurers, which pay the claims in exchange for premiums and other fees.
Consultants and insurers said companies with as few as 25 to 50 workers are exploring self-funded programs and could make that switch by
Those fully insured plans also face regulations and taxes that can amount to more than 3.5 percent of premiums, according to the
Benefiting from large numbers
Still, analysts at two
The institute reported 58 percent of workers with health coverage were in self-insured plans as of 2013, up from 41 percent in 1998. About 65 percent of firms with at least 50 workers offered at least one self-insured plan, while 13 percent of smaller firms did so, the institute noted.
Big organizations benefit from large numbers, said
While sizable employers with self-funded coverage often rely on insurers to administer benefit plans and process claims, the employers can pay the claims themselves because they spread the financial risk over large pools of enrollees.
The risk can be steeper for small organizations because they have fewer participants paying in, which can leave a company with more modest reserves to cover rare, expensive medical cases.
"You start getting down into employers of 50 employees, 100 employees -- they have to protect themselves from large claims. If they get a
Health spending will still increase for the city, just not as much as it would have without self-funded insurance, said
"This is not just about how much we spend on health care. From the mayor's perspective, it's how healthy are our employees?" said
He said the city will double an incentive to encourage workers to undergo a biometric screening and wellness profile, including height and weight measurements, that promote better health and lower costs.
Self-insurance can make it easier for employers to analyze such incentives, health care usage rates and other data to fine-tune their coverage plans, said
"We try to give them all the information to make the right decision they need as the employer. From our perspective, we are happy to provide them with either fully insured or self-funded,"
Either way, analysts said insurance enrollees are unlikely to see little practical difference between a self-funded policy and a similar one that's fully insured.
A self-funded plan generally drops conventional premiums but replaces them with other participation fees that may carry the "premium" label, they said.
"Everyone should at least be evaluating that option,"
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