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Is Self Insurance A Realistic Alternative To Obamacare For Small Businesses?

Written by Ken Gaebler
Published: 3/19/2013

Some small business employers are using a loophole in the Affordable Care Act to self-insure their workers' health coverage. But is self-insurance a viable option for small companies?

Small business owners throughout the U.S. are understandably concerned about the impact the Affordable Care Act (ACA) will have on their companies. With many businesses already struggling to stay in the black, the fear is that ACA compliance will force business owners to reduce their workforces or scale back growth initiatives.

Self-Insurance as Obamacare Alternative

According to a California Healthline report, more and more small businesses are exploring self-insurance as an alternative to ACA mandates, since self-insured plans are exempt from insurance taxes and specified coverage benefits.

Although self-insurance plans have historically been geared toward large companies, insurance providers are now marketing stop-loss policies to small businesses--a type of self-insurance plan that limits employers' financial responsibilities beyond a certain per-worker amount.

While self-insurance plans may offer important cost benefits to small business employers, there are concerns that the practice could jeopardize the ACA and increase the cost of traditional health insurance by as much as 25 percent--especially if self-insurance plans focus on younger workers and push older, sicker workers to traditional insurance models.

To counter these concerns, California Healthline reports that California and other states are considering raising the threshold at which stop-loss coverage kicks in, effectively reducing the cost incentives for small companies to pursue a self-insured approach.

For small business owners considering whether or not to self-insure, it's important to perform adequate research and understand all of the available options in small business health insurance plans. If possible, include employee representatives in the process of evaluating candidate plans to improve workforce buy-in and to promote transparency across your benefits program.

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