[caption id="attachment_53125" align="alignright" width="412" caption="John Nacol, Chris Reiter, Victor McKnight"][/caption]
NORTH BAY -- As employers continue to grapple with ever-increasing health care costs -- with or without federal health care reform -- those with fewer than 100 employees are increasingly looking for affordable options, with the idea of partial self-funding gaining traction in the past few years, insurance experts said.
Many large, Fortune 1000 companies already self-insure their employee benefits, and the concept is far from new. But the option for smaller groups has received more attention lately, and brokers in the North Bay said they've seen an uptick in inquiries about partial self-funding models as means of creating a bit more flexibility in an otherwise inflexible, tightening marketplace.
John Nacol, chief executive officer of Santa Rosa-based Redwood Health Services, which specializes in benefit plans that involve partial self-funding, said the increase in attention by employers dates back to well before discussions of health care reform took shape.
"We've had a lot of business over the last 10 years, with small employers wanting to self fund a portion of their benefits," he said. "I think the biggest thing is it gives employers more transparency. I would say we're seeing more and more employers do it annually, probably about an 8 percent increase in interest."
And interest from employers has accelerated over the past two years, as the Affordable Care Act of 2010 forced escalating health care costs to the center of the national discourse and to the top of every employers' mind.
"I'd say in the last couple of years it's become more prevalent," said Chris Reiter, vice president of employee benefits for Woodruff Sawyer & Company in Novato. "Health care reform had something to do with it just because employers are looking for a bit more flexibility."
Victor McKnight, a principal with Edgewood Partners Insurance Company in Petuluma, agreed.
"We're seeing more interest in it," he said.
For smaller employers, a partially self-funded model would typically augment, rather than completely replace, a product by some of the large insurance carriers, Mr. Reiter and Mr. McKnight said. A company with thousands of employees can more easily take on the risk of being self-insured because they have a much larger pool to spread that risk. A smaller employer, however, would need to determine if they would benefit from essentially going it alone in terms of their risk pool, Mr. McKnight said.
A smaller employer is "never going to completely self-insure," Mr. McKnight said. "But they can partner with an insurance company to take on added risk from some premium savings in the long term. Getting out of the general pool and standing alone can be a very good thing."
Companies that are comparatively young -- a tech start-up, for instance -- might determine that other, less healthier companies within its policy are responsible for the annual premium hikes that nearly no employer has averted. Likewise if a company has a strong wellness culture and has fewer claims than another that may be more lax.
"A company would only want to do this if they feel they're better than the risk pool," Mr. Reiter said. "If they're an older group, they're probably going to want to stay with traditional insurance. If you're a younger company, it can oftentimes be a really good solution. When you're a good risk and in that pool, you're basically subsidizing that risk."