Small Businesses Can Control Costs with a Self-Funded Health Plan

Business Week has suggested that the government “Make Health Insurance Cheaper for Small Employers” by requiring insurers to issue standard policies “or at least dramatically reduce the number of policy alternatives—so that businesses could better compare them.” This suggestion is certainly well intentioned but missing the mark. The issue is not that there are too many plans for employers to choose from but likely that none of the choices offered can really serve to address the particular needs oftheir organization. Instead of simply limiting the number of insurance policies offered, small employers should be encouraged to embrace self-funded health plans that will help keep costs in check because these employers can design plans to fit their employee population’s specific needs. As it stands now, the Centers for Medicare and Medicaid Services “requires policies to be compared across only three hypothetical patients.”

Business Week notes that:

“Small business owners tend to change their insurance plans often, as they search for more affordable insurance. Not only does this switching impose costs on the businesses, but it also motivates insurers to take short-term approaches to health coverage for small businesses.”

This does not have to be the case at all. Small businesses don’t have to jump from plan to plan, leaving employees feeling uncertain and in a continual state of re-adjustment. Today, smaller employers have some options that weren’t available to them just a few years ago. A third-party administrator can help a small employer craft a health plan that fits their particular needs. And a self-funded plan is not stagnant. It can be altered to accommodate changes in a small employer’s work population, providing much-needed flexibility.

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