Smart Benefits: Self-Funded Insurance - A Growing Option Among Employers
Monday, May 11, 2015
With self-funded plans, employers assume direct financial responsibility for their employees’ claims. The advantages?
Responsibility for administration and paying claims is handed over to a Third Party Administrator or insurance carrier
The Health Insurance Industry Fee doesn’t apply to self-insured plans
Self-funded plans do not have to meet all the benefit design requirements under Obamacare, just the minimum essential value and affordability requirements
Self-funded plans from most state insurance laws, including reserve requirements, mandated benefits, premium taxes, and consumer protection regulations.
But self-funding also has some downsides, most notably, risk. Claim activity can vary monthly and, as a result, so can costs – a challenge for companies with cash flow issues. And, since claims of members are not comingled with the insurer’s risk pool, a handful of large, unexpected claims can be crippling. To help protect against large, unexpected claims, employers may buy stop-loss coverage.
While self-funded have traditionally been more common among large employers, small groups are starting to take notice. According to the Kaiser Family Foundation 2014 Employer Health Benefits Survey, 15% of workers in small companies (3-199 employees) were covered by self-funded plans. That figure rose with the number of employees: 81% of employees in large firms (200+ workers), 83% in companies with 1,000-4,999 employees are, and 91% of covered workers in firms with 5,000 or more workers were in self-funded plans in 2014.
Related Slideshow: Massachusetts Business Rankings
See how Massachusetts stacked up.
Massachusetts has 2015's 28th highest insurance premium penalties for high risk drivers, according to a WalletHub report.
Mass is behind Colorado and New Mexico who come in at 26 and 27 spots respectively while Mass is ahead of Tennessee and the District of Columbia who rank 29 and 30 respectively.
Massachusetts ranks 14th overall in the category of DUI conviction annual premium increase with an amount of $756.
Massachusetts ranks 20th overall in the category of speeding over 20 mph annual premium increase with a total of $261 while ranking 21 overall in the category of two accidents annual premium increase with a total of $1,364.
Massachusetts has been ranked as the 5th most eco-friendly state in the country, according to a recent study by WalletHub.
Mass ranks tenth in environmental quality and fourth in Eco-Friendly Behaviors landing them in 8th overall.
Mass is behind Minnesota and New York who are in the fourth and third spots respectively, and in front of Washington and New Hampshire who come in at the six and seven spots.
Small Business Friendliness Grade: D+
The Economist grades states on an A+ to F grading scale for its small business climate. Massachusetts ranks near the bottom of the nation, joining New Mexico and New York in receiving D+ grades. 9 states scored worse than a D+ in the Economist rankings.
Overbearing bureaucracy and excessive licensing is stifling small business in America.
Forbes ranks each state in business costs, economic climate, and growth prospects.
The most damning in the commentary:
Massachusetts’ business costs, including labor, energy and taxes, are the highest of the 48 contiguous states—only Hawaii is higher—at 20% above the national average.
ChiefExecutive.net ranks each state in taxations and regulations, workforce quality, and living environment.
The most damning in the commentary:
Taxation and regulation are always the key barometers. Massachusetts and Oregon are the worst.
ALEC ranks each state in economic performance and outlook.
Although Massachusetts ranked low in economic performance, a forward-looking forecast is based on the state’s standing in 15 important state policy variables. Some of these variables include top marginal personal income tax rate and sales tax burden.
#18 Free Enterprise
Free Enterprise ranks each state in performance, exports, innovation + entrepreneurship, business climate, talent pipeline, infrastructure.
Massachusetts's reputation as a hotspot for science and technology endures in this year's rankings. The commonwealth is a center for STEM jobs and university research and development, ranking 4th and 2nd, respectively, in those two categories. It also ranks 6th as a center for high-tech establishments. Massachusetts is taking aggressive steps to bolster economic activity with high-impact university-industry R&D projects and new tools for tech-based startup companies.
The Pew Charitable Trusts
#45 The Pew Charitable Trusts
The Pew Charitable Trusts ranks each state in job growth and job creation.
Massachusetts added 38,368 jobs in 2014.
- Smart Benefits: Serve Up Wellness for the Holidays
- Smart Benefits: Employers Can’t Pay for Purchase of Employees Individual Health Insurance
- Smart Benefits: Transitional Reinsurance Enrollment Count Deadline Extended to Dec. 5
- Smart Benefits: Hardship Exemptions from Individual Mandate Published
- Smart Benefits: Consumerism Continues
- Smart Benefits: Supreme Court Will Hear Health Insurance Subsidy Challenge
- Smart Benefits: November 15 Key for Individual – and Employer – Health Exchange Enrollment
- Smart Benefits: New IRS Guidance on FTE Look-Back Period
- Smart Benefits: Obamacare Exchanges: Enrollment Expectations
- Smart Benefits: When Dental and Vision Don’t Count…Under PPAC, That Is
- Smart Benefits: Deadline Next Week for Health Plan Identifiers
- Smart Benefits: CMS Issues Proposed Rule on Definition of Spouse
- Smart Benefits: Start 2015 by Planning for Health Reform Changes in 2016
- Smart Benefits: New FMLA Spouse Definition Now In Effect
- Smart Benefits: HHS to Up Investigations of Exchanges
- Smart Benefits: Are You Audit-Ready?
- Smart Benefits: New SBC Template Delayed ‘Til 2016
- Smart Benefits: EEOC Notice Clarifies ADA-Compliant Wellness Programs
- Smart Benefits: Fines for Small Business Premium Reimbursement Delayed
- Smart Benefits: 8 Reasons to Have an Employee Handbook
- Smart Benefits: The Employer Mandate Has Arrived
- Smart Benefits: New Forms for Filing this Tax Season
- Smart Benefits: Voluntary Benefits Up with Employers and Employees
- Smart Benefits: FLSA Exempt Status Change for Home Care Workers Halted
- Smart Benefits: New Study Shows Exchange Satisfaction Higher