Small Businesses Consider Self-Funded Plans Under Reform

self funding

During the past two years, businesses have been implementing segments of the Affordable Care Act (ACA), which was passed into law in March 2010. Beginning in 2014, the bulk of the plan will go into effect.

As small businesses evaluate upcoming mandates, many are exploring the option of self-insuring as a way to circumvent ACA requirements. With self-insured plans, employers cover all the benefit claims, and employees pay premiums and deductibles. Often businesses purchase a stop-loss policy for medical claims to protect their exposure to extensive risk. Historically, self-insuring has been a popular option with larger employers, but that trend may be changing.

According to ACA regulations, employers with self-insured plans do not need to meet these mandates:

  • Payment of the new excise tax on health insurance premium, if they provide more expensive benefits
  • Community rating on premiums, including the 3:1 age band
  • 80/20 rule requiring insurers to spend at least 80 percent of premiums on medical costs
  • Essential health benefit rules

Learn more about why small employers are interested in self-insured plans by reviewing the articles recently published by The Washington Post and Healthcare Finance News.


If you are a small employer, or you work for a small employer, how do you believe ACA will impact your health insurance?