Many stark, difficult healthcare-benefit choices face small and medium-size companies as the healthcare-reform bill provisions begin to kick in.
Among these choices are going the route of self-insurance, dropping healthcare benefits entirely and/or shifting most of the burden to employees.
As details of the recent healthcare-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 healthcare 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,” says Robert Calise, principal at Cornerstone Group of West Warwick, R.I., a member firm of United Benefit Advisors (UBA). “Since healthcare 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 says.
Currently, this newsletter’s parent, Information Strategies, Inc., is conducting a nationwide survey of business leaders, asking them what they are doing in anticipation of the healthcare-reform requirements.
To take the survey, go to <a href="http://www.surveymonkey.com/s/TBJ6DPC">Click here to take survey</a>
In the meantime, several recent studies highlight this trend. The 2010 UBA Employer Opinion Survey found that 17.5% of respondents currently have a self-funded plan, while 12% said they would like to implement that funding strategy someday.
While terms such as “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, says 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 adviser.