For larger firms, self-insurance health plans increase in popularity - South Florida Business Journal:

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“This is typically for companies spendingover $1 millionj on premiums, and that are lookingy for alternative ways to finance theitr insurance,” said Gary Reshefsky, senior VP at in Coral A survey of 250 companies in South Floridq shows that about 45 percent of companies with at least 1,000 employeesa are self-insured, compared with 48 percen that are fully insured. For the partnered with the human resource associations in Broward and PalmBeach counties. It received feedback from 250 employers with 20to 7,00o0 employees.
The self-insured percentage declines dramaticallu as the employee pool Twelve percent of companies with 500 to 999 employeesd areself insured, compared with 88 percent that pay a premiu to an insurance company. Of those companiez with a workforce of 200to 499, about 6 percengt are going it alone, while 85 percent are using fully-insured plans. Ralph F. Cheplak is senior VP and CFO for in a self-insurer with an employee base of 250 locatedc in South Florida and Sarasota. He said the company, whic has been self-insured for more than a continues because the numbersmake sense.
Insurance companie charge too much, he “They are making numbers based on generalize statisticsof companies,” he “So, you may be paying more than is Companies smaller than Tropical just aren’t doing it, accordingy to the Fort Lauderdale offic of Seitlin Benefits. TAX FLEXIBILITY ARE ADVANTAGES The largerthe company, the more credible theirr risk assessment and the easier it is to budgetr costs, says Dick Leonard, senior VP of employees benefits at ’ Southeast region, in Fort The advantages of self-insuring include tax break and more flexibility with regard to who governz the company’s insurance-related issues.
A self-insuring company is not bounfd bystate mandates, doesn’t pay a premiu tax and typically pays less in administrative For example, the averagwe state tax tied to insurances premiums is 2 percent, so a compangy would save $12,500 on a $626,000 annuak premium. Companies also hold onto reserveas for claims that are incurred and paidsometimw later. “Assuming this ‘reserve’ is maintained in an interest-bearing account, the employer can regard it as a sourcrof income,” Seitlin Executive VP Shannon Alfonsok said.
“Therefore, additional incomes is generated due to the intereston Self-insured companies are also not subjecy to charges, which typically run betweejn 3 percent and 10 percent, for fluctuationd in claims, Alfonso said. The down side for an employerr is that it assumes all risks associated with The employer can hire a third party to administerf and processthe claims, but the thirds party is not responsible for any claim That’s why figuring out a realisticf projection for claims is so Alfonso said. Employers can prepare for the unexpectef by buying aggregate coverage for their groulpand “stop loss” coverage for individuals.
The aggregate coverage protecte employers from eligible claims that exceed125 So, if an employef had projected claims of $1 million, the aggregatew kicks in at $1.25 million. An employer can get both typesof coverage, whicuh is advised, Alfonso said. It is key for companies to have informatio about the costs and risksx associated withbeing self-insured, because goinfg back to being fullhy insured can be costly. Companies that returm to being fully insured also will have outstanding claims that will have tobe “Somebody has to explain to the client all thesw moving parts,” Leonard said.
“In this day and age, you don’ft need too many of thes large claims to eat up Employers and employees could also get mixeed up in messy resolutions in casesx where the employer seeks to recover monehy paidon claims. For example, an employee is in a car accidenr and the employerpays $100,000 on claims. The person responsibl for the car accident is the driver of theother car, but he only has $15,000 in The employee files a lawsuit againstt the other driver, seeking money for pain and lost wages and other associatedd problems.
Federal law gives the employerd the ability to recover what it can from the employede if he or she receives any money from the otherdrivetr and/or their insurance company. If the other driver’s insurance compan pays out $15,000, the employer can offset its $100,000 payout by claimingf the entire $15,000. If the employee gets a payout from the the same rule for theemployet applies. If the companyh was fully insured, however, state law would, in require a judge to determinse an equitable distribution ofthe money, Greenspoon Marder personaol injury attorney Mark Siedle explained. So, the issuex involving self-insurance can get complicater quickly for the employerand employee, he noted.