Small Businesses Blaze a New Trail with Self-Funding

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White paper released today explores why small and midsized companies consider self-funding a new way to pay for employee health care.

Percentage of employers who are completely self-funded by size, region and top industries

Self-Funding by the Numbers -- Percentage of Employers Who are Completely Self-Funded by Size, Region and Top Industries

Since health care reform, smaller companies under 200 employees have shown an increased interest in self-funding, which offers more control over the dynamics of the plan.

As details of the recent health care reform legislation trickle down from Washington, employers are starting to wade through the flood of legal and financial consequences these laws could have on their current and future employee benefit offerings.

The Patient Protection and Affordable Care Act (PPACA) -- laden with a number of new requirements, an employer mandate and unknown future costs -- is prompting many employers to take a hard look at what they're doing -- and what they're paying -- for employee benefits.

While cost-sharing and cost-shifting are common strategies, some small and midsize employers are taking an even bigger plunge into an alternative method of funding that once was feasible only for big companies: self-funded health care plans. “There has been a trend over the past decade of small to midsize employers moving toward self-funding, but we are seeing this now more than ever,” said Robert Calise, Principal at Cornerstone Group of West Warwick, R.I., a Member Firm of United Benefit Advisors (UBA). “Since health care reform, smaller companies under 200 employees have shown an increased interest in self-funding, which offers more control over the dynamics of the plan,” he said.

Several recent studies highlight this trend. The 2010 UBA Employer Opinion Survey found that 17.5 percent of respondents currently have a self-funded plan, while 12 percent said they would like to implement that funding strategy someday. While terms like “assuming all risk and cost” and “costs can fluctuate” may seem a bit jarring to some employers, the advantages of self-funding over fully insured coverage can be significant, according to Cathy Jackson, vice president at Atlanta-based Arista Consulting Group, a UBA Member Firm. Jeff Hadden, a partner of Indianapolis-based LHD Benefits, a UBA Member Firm, said the community rating and other reform-related changes could have a major impact on future costs for employers in fully insured plans.

While switching to self-funding can provide many benefits, employers should be aware of a few changes they will see. Cash flow, stop loss insurance protection, annual discrimination testing and other administrative duties create a lot of moving pieces that may require the advice of a qualified advisor.

To receive the full report, “Small Businesses Blaze a New Trail with Self-Funding,” contact your local UBA Member Firm.

ABOUT UNITED BENEFIT ADVISORS (UBA) -- United Benefit Advisors, is a member-owned alliance of more than 140 premier independent benefit advisory firms with offices in more than 165 offices throughout the U.S, Canada and the U.K., and is one of the nation's top five employee benefits advisory organizations. UBA Members collaborate with more than 2,000 professionals to provide best in class solutions that positively impact employers and make a real difference in the lives of their employees and families. UBA produces the UBA Benefit Opinions Survey, which serves as companion pieces to the 2010 UBA Health Plan Survey, the largest health plan benchmarking survey in the nation. Employers, advisors and industry-related organizations interested in obtaining powerful results from our shared wisdom should visit UBA online at to locate your local UBA Member Firm.

Bill Olson
Marketing Manager
Phone: 317-660-6652


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