Self-funded insurance policies may be worth the gamble for small business, when the ACA goes into effect.
Recently, we discussed how the delay of the employer mandate has given companies more time to readjust their healthcare policies so that they can adhere to impending ACA requirements. These complicated regulations will require the reorganization of company policies, which can be time consuming for HR departments without the assistance of a human resources consulting company.
Small businesses can avoid enrolling in expensive insurance policies or paying the government costly fines. One option that employers have to consider is whether or not they should switch to self-insured plans, which would mean that the risks and responsibilities of employee healthcare costs goes to the employer instead of an insurance provider.
Self-funded healthcare allows the employer to create benefit plans that are unique to their company needs, and requires them to pay for medical claims out of pocket or from a pool with employee contributions. This is especially beneficial to large corporations because their size allows them to accurately determine risks, and they have more security for unexpected claims.
According to Maura Calsyn and Emily Oshma Lee of the Center for American Progress, 93 percent of businesses with 5,000 or more employees and 80 percent of businesses with at least 1,000 employees, have self-funded healthcare.
However, as Calsyn and Lee pointed out, small businesses may be looking to adopt this practice because paying for medical costs on a case-by-case basis can be more profitable than enrolling in a set plan with an insurance company, especially if you have healthy employees. The inevitability of ACA costs could be worth the self-funded insurance gamble for small businesses.
"By comparison, only 15 percent of businesses with fewer than 200 employees were self-funded," the source stated. "But with new Affordable Care Act requirements on the horizon, the number of small employers that self-insure may rise, especially if these employers are able to find ways to minimize their risk."
Choosing a a healthcare option often involves taking financial risks, and no company wants to put too much at stake when it comes to their money. Determining your employee healthcare needs can be an easier task with an HR software system.