Self-Insuring Employee Health Benefits. Yes or No?

The magnitude of health benefit payments can be subject to uncertainty.  Plan sponsors typically obtain insurance to protect against the uncertainty or they may choose to self-insure.  

Many large employers prefer to self-insure health plans offered to employees rather than purchase them from insurance companies to save costs, provide the best healthcare value for their employees and for more significant control over the plan’s administration and funding levels.

Most self-insured health plans are regulated by the United States Department of Labor, Employee Benefits Security Administration (DOL-EBSA) under the federal Employment Retirement Income Security Act (ERISA). However, DOL-EBSA does not regulate self-insured plans that are sponsored through school districts, municipalities, and churches. State insurance laws and state mandates typically do not apply to self-insured health plans.

Florida State Insurance Regulation pursuant to Florida Statute 112.08, F.S., authorizes local governmental units to self-insure for health, accident and hospitalization coverage. The plan must be determined actuarially sound and obtain approval by the Office of Insurance Regulation (OIR).

In order to obtain approval from the OIR, each local government unit or consortium must submit its plan along with a certification — prepared by an actuary who is a member of the Society of Actuaries (SOA) or the American Academy of Actuaries (AAA) — as to the actuarial soundness of the plan.  The plan must provide sufficient revenue to pay current and future liabilities, as determined according to generally accepted actuarial principles.  After implementation, the state continues its oversight of these plans by requiring annual filings.  The annual filings include a statement prepared by an actuary as to the actuarial soundness of the plan.

In addition to the state of Florida, the state of Illinois also monitors and provides oversight to self-insured healthcare plans offered by government and public entities.  In general, self-insured health plans are growing in popularity across the country. A dramatic escalation of employee healthcare costs is forcing organizations to look for ways to manage premium expenditures and vendor fees and improve cash flow, while still delivering the health coverage they desire for their workforce.

Does your organization self-insure the healthcare benefits offered to its employees?  If so, do you agree that this method of insuring healthcare benefits provide the organization with more control over the costs associated with healthcare?   If not, what are some of the disadvantages your organization has experienced?

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