Is Self-Insurance a Viable Option for Small Employers?

Once a strategy pursued only by big companies, self-insuring is being used by a growing number of smaller employers to provide health care coverage to their employees. According to a report by the nonprofit Employee Benefit Research Institute, from 2013 to 2015 the percentage of employers with fewer than 100 workers that offered at least one self-insured plan increased from 13.3% to 14.2%. The share of employers with 100 to 499 employees offering a self-insured plan rose from 25.3% to 30.1%.

Firms that self-insure bear the financial risk of employees’ health care themselves. That means they pay for each claim as it’s incurred, instead of paying a fixed premium to an insurance company. Since these employers are assuming the risk, they must have the cash flow to pay the claims. So, it may not be for everyone. But firms with as few as 15 employees can make it work.

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