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Tips and Tools
Advantages of being Self Funded under the New Health Care Law

There are several advantages for those groups who qualify for a partially self funded option (are healthy enough to be accepted and have enough employees). Among the best advantages are:

1) Self funded groups will still have the availability of community ratings. Under the new law, groups in each state will be lumped together in terms of ratings. That will benefit groups in high medical cost areas, predominately large cities, who will find their cost decrease, but will adversely affect groups currently in lower cost areas, who will find their rates increase by being averaged with the high cost areas.

2) Self funding administrators can decline coverage to groups. This means that those accepted have lower claims experience than the average groups in each state. In other words, the fact that you are part of a self funded group, means your rates will be lower than other fully insured groups with the same demographics.

3) Self funded groups are not restricted to the mandated plans in the new health care law, and are not restricted to the 'Three Tier Rating System' that will be imposed on fully insured groups. Under the new law, fully insured groups will have at most three age tiers to distribute rates. This will benefit older groups, as their rates will be averaged with lower aged employees across the state; however, younger groups will see a dramatic increase in rates. Also sex can not to be used to determine rates for fully insured groups. Those groups with a larger number of male employees will see a large increase in rates. Under the new law only tobacco use will be available to discriminate rates. Self funded groups avoid all of these problems, and can determine rates as they are now computed.

4) As of 2014, fully insured groups will face an additional 3% tax on premiums. Self funded groups will not pay this tax.

There are many other advantages, however, the ones listed above are the most dramatic. Each of them by themselves would make a self funded option more attractive; all of them together make it almost impossible to overlook this course of action for a small business that can qualify.