SOURCE: Business Benefits Insurance

December 17, 2008 09:47 ET

Reining In Health Insurance Premiums -- Bay State Employers Can Use Partial Self-Funding

Creative Strategies Can Meet Stringent New State Requirements, Says Broker Jim Edholm of Business Benefits Insurance

ANDOVER, MA--(Marketwire - December 17, 2008) - In a tough economy, Massachusetts employers need creative strategies to keep a lid on healthcare costs, says veteran broker Jim Edholm, president of Business Benefits Insurance in Andover.

With "partial self-funding," the employer pays small, routine claims while the insurance company pays infrequent, big ones, he says.

It's allowed under the state's healthcare law, but you have to meet new requirements that take effect on Jan. 1, 2009, Edholm points out.

Self-funding used to make sense only for big organizations. But the availability of insurance plans that limit the employer's risk now makes it feasible for medium-sized and even small companies with as few as five employees, providing they meet carrier health requirements.

Moreover, if the employer is willing to share risk with its carrier by selecting a lower-cost plan and reimbursing employees when they run up significant out-of-pocket costs, it can achieve savings even with large, brand-name carriers.

For instance, a 10-person company can use either partial self-funding or reimbursements to save more than $29,000 a year, shaving about 33 percent off its healthcare premiums, Edholm says. (A comparison table is available.)

The downside of partial self-funding is that the employer takes on a bit more risk, and if the employees have an unusual run of bad luck with illness or accidents, the projected savings may not materialize.

"You have to look at your employee population. If they're healthy, self-funding is a great way to save without reducing coverage," Edholm says. "The odds are high that you'll do better by taking on a little more of the risk yourself."

Business Benefits Insurance (www.bbibenefits.com) is an employee benefits planning firm. Edholm has counseled employers more than 25 years.

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