Self-Funding in the Age of the Affordable Care Act

To avoid rates based upon age, Federal and State premium taxes of up to 5% on every premium dollar, and flexibility in plan design, employers down to 10 employees in select parts of America will consider self funding. Per person deductibles of $25,000 or more will be accepted by employers with the hope and expectation their employee group is healthier than the average. Plan designs that minimize claims activity are likely reality long term, but initially self funded employers continue coverage levels in place when fully insured.

Stop loss insurers expect employers to disclose information on potential high cost claimants, and employers will readily comply since they are financially responsible for claims losses up to the deductible. Contract types that include claims runout protection will be increasingly popular the smaller the employer. Self funding was often an obvious choice for employers spending $1 million or more in premium annually. Times have changed with the advent of Obamacare as the Law of Large numbers is less of a consideration in the past, and when there is hope under self funding that actual costs in the future will be lower than a fully insured 25% – 50% rate increase.