No, but this is definitely a common misconception that’s been circulating out there. While it’s true that many large-size companies do self-fund their employee benefits, this type of health care plan isn’t just for businesses with hundreds of employees.
In fact, when we look at the steady growth that’s been occurring in self-funding over the last few years, the largest shift away from fully insured plans is happening at small- and mid-sized companies.
The size of a company’s workforce is undoubtedly a factor, but it’s one of many that must be considered when employers contemplate the move to a self-funded plan. What are some of the others? I’d say the biggest is a company’s financial state. Claim costs can vary from month to month, so it’s important to assess the full picture as far as your reserves and cash flow go and feel comfortable with your overall economic situation. Related to that, another factor is the level of risk your business is willing to take on. Since employers assume the risk with claim costs in self-funding (vs. an insurance carrier), they often use tactics like stop loss insurance to coordinate appropriate coverage. One more main consideration is how important a customized health plan is to your company. If your employees could benefit from tailored health coverage or specific benefits, self-funding can make that possible.
There’s no magic number that determines how many employees a company must cover to have success with self-funding. If you want to see if it’s a viable option for your business, contact a third party administrator and get the conversation started.