Nov. 25, 2013—The U.S. House Committee’s Small Business Subcommittee on Health and Technology held a hearing recently to examine the trend of small businesses choosing to self-insure with regard to health care coverage for their employees. Entitled, “Self-Insurance and Health Benefits: An Affordable Option for Small Business?”, the hearing compared the benefits of self insurance compared to the purchase of health insurance from insurers.
“Traditionally, small businesses have not utilized the option to self-insure,” said Rep. of New York and subcommittee chairman Chris Collins. “According to the Kaiser Foundation, only about 16 percent of employees at small firms are covered by a self-insured policy as opposed to 83 percent of employees at large firms. But with the onslaught of regulations, cost increases and uncertainty surrounding fully insured plans as a result of the president’s health care law, more small businesses may choose to explore self-insurance as a manner of providing competitive benefits packages for their employees.”
Michael W. Ferguson, president and chief executive officer of the Self-Insurance Institute of America in Simpsonville, discussed the basics of how self-insurance options work.
“The [self-insurance] option is to retain the financial and legal risk through the use of a self-insured group health plan. This is also known as self-funding. Under this arrangement the organization pays eligible health care claims as they are incurred, either directly like other business expenses or through a separate trust,” Ferguson said. “Self-insured employers typically outsource claims administration functions and retain stop-loss insurance as a financial backstop for catastrophic claims.”
Ferguson also pointed out one large benefit of choosing a traditional group health insurance policy: The insurance carrier takes all the financial and legal risk to the carrier, while self-insurers have to carry that risk themselves.
Thomas Faria, president of Sheffield Pharmaceuticals in New London, Conn., discussed a variety of benefits of self-insuring. Along with the ability to save considerable cost, self-insuring allows the business to access cost data and see where their dollars are being spent compared to national norms. He said this “cost transparency can allow a business to develop its individual plan to educate and incentivize its consumer activities to most efficiently use health services, reducing both the business’s, consumers’ and overall health system’s costs.” This leads to businesses encouraging employees through education and incentives to live a healthy lifestyle and get preventive care.
To view the full testimony from the hearing, visit the Automotive Service Association’s legislative website at TakingTheHill.com
