How to Self-Insure Your Company

Insurance works when a population pools money to protect the few who sometimes need help. Insurance companies organize the collection of money and the payout of claims, and money that does not get spent is called profit.

You probably knew that, but is there a way to organize the people at your company to create your own insurance fund? If you could create a pool of money for claims, then those dollars that do not get used could persist in your account and get reinvested in your firm.

If your company employs less than 50 people, then you do not have a large enough population to fully insure your members from a sustainable internal fund. Though a financial tool called a Health Reimbursement Account (HRA) can save significant funds by employing this concept on a limited scale.

A Health Account for Us

Imagine the following scenario: You take the money that you are currently spending on health care as a company, largely on health plan premiums, and split that pile of money into two. You now have two piles of money for health insurance benefits.

The first pile you use to buy inexpensive, high deductible health plans for your employees. Ordinarily your employees would not like this because high deductibles mean they pay more at the time of treatment, but this is where that second pile of money comes into play.

With the second pile of money you create a company savings account. This pool of money is shared by the group. When an employee has a medical expense, the cost gets paid for by this company savings account – a Health Reimbursement Account. So when Sue goes to the doctor, although she has not reached her deductible, her company will pay for most or all of the visit from the shared account. If Sue has major medical claims, she (and the company account) is still protected by the insurance carrier.

HRA Administration

There are a couple of approaches to managing this fund, including internally or through a payroll-type company. You can define a copay structure for office visits that mimics very expensive health plans, but without the outrageous premiums. SuperAgent has specialists that can help you get setup and manage an HRA. The end result is that your company lowers it’s overall expenditures on insurance, and your employees can enjoy the features of a rich benefits package.