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Sam Fleet: Self Funding Not for All

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Las Vegas – Benefits brokers who are thinking about helping employers self insure need to understand what they and the employers will be getting into.

Sam Fleet, president of AmWINS Group Benefits, Warwick, R.I., talked about the risks and rewards of self insuring here in June at the annual convention of the National Association of Health Underwriters (NAHU), Washington.

Some — including federal regulators — have suggested that small and midsize employers might rush to self insure to escape from new coverage rules imposed by the Patient Protection and Affordable Care Act of 2010 (PPACA). PPACA exempts self-insured plans from many new rules already or soon will apply to insured group plans.

The PPACA provision requiring major medical carriers to hold administrative costs to 20% of individual and small group revenue are also encouraging brokers to consider new ways to serve customers, Fleet said.

In the past, Fleet said, many brokers avoided thinking about helping employers set up self-insured plans. Because of all of the complications involved, “it was really hard for us to sell” self-insured plans, Fleet said.

If you, a health insurer, now have to spend at least 80% of your small group revenue on health care and quality improvement efforts, “you’re not taking dollars out of your executive health plan,” Fleet said. “They’re coming out of broker comp.”

But an employer that self insures will face extra complexity and exposure to new risks and greater amounts of risk, and an employer that wants to return to offering traditional health insurance may have trouble changing back, Fleet said.

Chances are that a small employer that wants to self-insure will also have trouble getting reasonably detailed claims data from its current carrier, Fleet said.

Because of those constraints, an employer that wants the cheapest possible coverage, faces little competition for labor, and has little sense of social obligation to the employees is probably a poor candidate for self funding, Fleet said.

The best candidates want to know and control the data, want to offer good benefits, and may see self insuring as a way to improve the health and productivity of the employees, not simply to save money, Fleet said.

Correction: An earlier version of this article described NAHU’s location incorrectly. NAHU has moved to Washington.