This article appeared on HartfordBusiness.com on December 18, 2017 from Brooks Goodison, President of Diversified Group.
Connecticut health insurers recently announced their 2018 premiums. Employers won’t like them. Rates for some small business plans will rise more than 25 percent. That follows an average increase of 5 percent last year.
Many Connecticut firms are understandably looking for ways to avoid these premium hikes. Some are opting to “self-insure,” or pay their workers’ health claims directly instead of turning to traditional insurers for coverage.
Unfortunately, officials in some states want to effectively ban self-insurance. The U.S. House of Representatives has passed legislation that would counteract those efforts. But it’s stalled in the Senate.
The upper chamber must stall no longer. Scores of Connecticut businesses, nonprofits, and municipalities — not to mention their workers — are counting on Congress to safeguard their self-insured health benefits.
When employers buy health plans from traditional insurers, they typically pay far more than their employees’ care actually costs. Their premiums cover insurers’ overhead, administrative costs and profits.
Insurers also have to protect themselves against a potential worst-case scenario, where multiple employees face huge medical bills. That pushes premiums even higher.
But if an employer has a good year, with low medical costs, his insurer doesn’t send him a rebate. That insurer keeps the excess, perhaps to cover another employer in its risk pool that wasn’t so lucky.
Self-insured organizations, by contrast, pay only for the care their employees consume. According to one study, employers can cut their health expenses by about 10 percent over the first five years following a switch to self-insurance.