Happy Jack Adventures is a successful small business, much like the many others the federal government hopes will line up to buy health insurance for their workers once the Patient Protection and Affordable Care Act fully kicks in.
Yet fearful of sharp premium hikes and with a mostly young, seemingly healthy workforce of 50, Jack McCormick, the founder and CEO of the Seattle, Wash.-based adventure tourism company, has something else in mind.
McCormick believes his firm is fiscally sound enough to bear the risk of self-insurance and is looking to make the switch.
“(Self-insurance) looks like a good option for us and a way to avoid high premiums and other hidden costs we don’t know about yet,” he said. “I call those gotcha costs, and I hate those. Everyone does.”
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It’s views like these that researchers and analysts have speculated could threaten the integrity of the PPACA, with small employers avoiding the requirements of the law altogether by going the self-insurance route and, along the way, potentially driving up the health care costs the government is hoping to contain.
About 60 percent of insured American workers already are in self-insurance plans. Most of these workers are either in unions or employed by larger companies.
Self-insured employers pay for most worker health costs directly, though they typically contract with an insurer or another company to administer claims. Employers that self-insure buy coverage known as stop-loss to keep one huge claim from wiping them out.
Brokers say a growing number of organizations see such plans as low-cost alternatives to conventional coverage, given that they’re exempt from PPACA requirements such as insurance taxes and specified benefits.
“I’ve been at this over 30 years, and interest in the self-insurance market definitely is increasing,” said Larry Thompson, CEO of BSI Strategic Consulting, a Fresno, Calif.-based firm that specializes in self-insurance.
According to a recent study by Munich Health North America, a subsidiary of reinsurer Munich Re, more employers are expected to follow the self-insure path – perhaps many more.
Among the 326 industry executives surveyed, 82 percent said they have seen a growing level of interest among employers in self-funding their group health insurance plans over the past 12 months, with nearly one-third saying that interest has increased “significantly.”
Nearly 70 percent of health insurance organizations plan on growing their self-funding portfolios over the next year, the survey also found.