Deal Yourself a Better Hand: The Allure of Self Insurance
Additionally, self-insurance has previously had an “Achilles heel” that involved the inability to return to the traditional market if one or more members of the group became seriously ill. Since no carrier was required to accept someone who was currently ill, the employer might find himself “stuck” with very expensive chronic claims. Now, however, employers need not fear since carriers will no longer be able to enforce pre-existing condition clauses or exact a high premium because of someone’s ill health.
Also causing movement toward self-insurance is the limit placed upon carriers for non-claims expenses. Carriers must now spend 85% of their revenues on claims, leaving 15% for everything else (marketing, underwriting, overhead, etc.) including agents’ commissions. As agents’ compensation has begun to fall, placing clients in self-funded programs has become increasingly attractive since there is no limit on commissions in those situations.
For many years self-insurance has been a safe, smart and reliable alternative for many employers, including those with as few as 25 employees. Everything indicates that will continue to be the case, the caveat being that the program must be run as efficiently as if it were insured, i.e. the program has to include aggressive and effective cost containment. That’s where OMCA comes in. We’ve managed medical costs in group plans and workers’ compensation programs since 1981 and we can help create advantages for you in networks, utilization review, pharmaceutical management, and centers of excellence that are the same as the big boys.
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