When it comes to benefit plan design, are we missing an opportunity? how many of you have considered a "self-insured” plan? I'm assuming that most of you have not considered it for two reasons: 1) "The "self-insured” has a negative connotation for most of us and 2) Our brokers have never raised it as an option.

I would encourage everyone to take a look at the option of self-insured again or in some cases for the first time. Brokers are now offering options that provide employers with potentially, in some cases, substantial savings.

Recently I asked John Nacol, CEO of Redwood Health Services, to provide our consulting practice with some information regarding this historically "taboo" subject. Now, it appears that this option may not be as taboo as it was in the past. In fact, it may be a great alternative to at least compare against during your next benefit review cycle.

If your current broker doesn't provide information regarding this option, I’d encourage you to contact a broker that will provide this as an option of comparison. "As a consulting firm, we want clients to have access and knowledge of all the options that are possible, including "self-insured" plans. In some cases, it may not be a solution, but it's worth taking a look at, says Brenda Gilchrist, CoFounder /Principal       Human Resources Consultant of The HR Matrix, LLC.

When an employer hears the word “self-insurance” they think high risk, catastrophes, financial ruin, etc, however, self-insurance can mean saving money, information, controlling your costs, and low risk. In today's insurance market self insurance can come in many forms.

Historically self-insurance has only been for very large employers, generally 500 employees or more. The employer bears the initial costs of a medical bill say up to $10,000, then a reinsurance company steps in to pay the excess.

However, the small group (50 employees or less) employers can also self insure and participate in some of the same attributes of a large employer without having to be exposed to major risks.

The average American spends approximately $800 a year for medical care. With this in mind most employers are buying more insurance than they need.

Both large and small employers face the same difficulties in trying to keep medical insurance affordable and complete. The large employer may have a more difficult path because if they are not considered insurable and may not get any insurance carriers to quote on their group.


Small employers  (2-50 employees ) have a more favorable route to insurance. In California,  small employers are guaranteed insurance provided they meet certain criteria.

Once insurance is offered an employer needs to choose a plan that is affordable and offers the benefits that meets the needs of the employees. In today's market many high deductible plans are being offered by insurance carriers. These high deductible plans normally will reduce the costs to the employer while passing on the initial costs of the benefits to the employee.

For example an insurance policy with a $2,000 deductible would  require the employee to pay the first $2 ,000 of medical care before the insurance plan begins to participate in the costs of medical care. An employer could participate (self-insure) in sharing this initial deductible by paying a portion or all of the $2,000. There are IRS approved plans (HRA, HAS and FSA) that will minimize the tax consequence of the employee.

An insurance professional can point out which insurance products work with what IRS plans.

Once an employer decides to self insure they can build a benefit plan that can provide incentives or desincentives so their employees are spending their health-care dollar wisely. For example our research has shown that a MRI done at a hospital can cost between $,3000 to $4,000 while the same MRI at a freestanding facility can cost less than a $1,000.

Thank you to John for contributing the article content. If you are interested in modeling a "self-insured" option, contact your broker or go online to www.basicplus.com. You can also contact Brenda Gilchrist at The HR Matrix, LLC at 707-526-0877 x11 if you would like assistance with evaluating your HR programs, including your benefit plan design.

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John Nacol is CEO of Redwood Health Services, a Santa Rosa company that provides medical administrative services, and the Pacific Foundation for Medical Care, a nonprofit network of health care providers. He is president of the North Coast Association of Health Underwriters.